Hydrogen Supply Chains

Jamie Stone Excerpts

Tuesday 9th September 2025 Westminster Hall

[Jamie Stone (Caithness, Sutherland and Easter Ross) (LD)]

The hon. Member is making an excellent speech on a very important subject. He mentioned the production of ammonia. The fact is that fertiliser is made from ammonia and right now our farmers are facing increasing prices for a number of world reasons. Does the hon. Member agree that one of the strategic purposes of creating hydrogen is to support hard-pressed farmers all over the UK?

[Tom Collins]

The hon. Member is entirely right. Ammonia is a very important part of the future energy mix. It is interchangeable bidirectionally with hydrogen and it is a very compact energy carrier. It is a liquid—it is relatively easily handled and stored—but it also, vitally, provides direct injection into the agricultural fertiliser chain. That makes it a vital asset in our future energy system, as agriculture currently plays a very large role in our total carbon emissions.

How we get to the future energy system is similar to how we got to this point: economics is overtaking technology as the driver for change. It is not about choosing technologies; it is about choosing these key energy vectors and then facilitating markets to grow around them. If we look more closely at that challenge and at the current UK energy system, we have seen electricity decarbonising, but if we look at electricity use in comparison with other vectors in the UK, it plays a relatively modest role. If we look at our energy use over the course of a year, our daily electricity consumption is pretty flat, but if we overlay on to that the amount of gas we use as a country—remember, gas is providing a vital part of our electricity production, and indeed the responsive part—and we see waves with peaks in the winter and troughs in the summer. The peaks of those waves are three times higher than our day-to-day electricity use. Gas is doing the lion’s share of moving energy around the UK and supporting our electricity system, and oil, which is primarily used for transport and is our main vector for transport, sits at about the same level as electricity. That is the picture of how energy is split across the UK energy system.

What we can learn from that is that UK energy demand is peaky. It varies very rapidly, seasonally and throughout the day, especially for heat applications. As we move into a renewable world, we need to recognise that renewable production is also subject to these synchronous peaks and troughs. The UK is a small enough country that one weather system can influence the production of all our renewables. We are therefore subject to fluctuations both in the supply of renewable energy and in demand. We also know that global prices for energy will continue to fluctuate, and part of our Government’s strategy to make the UK rightly more energy independent is informed by our vulnerability to variations in international energy prices.

Whatever our vector mix, and however we cut up the pie of our future energy system, we absolutely will need storage to navigate these variations. The transition has rightly been described as a chicken-and-egg problem: how do we build a new energy system out of an existing one? We are led by economics, which means that we need a price for the new system. We need a price that breaks the cycle by providing producers with a way to sell their energy and by providing people decarbonising at the end-use point with the ability to buy the energy they need for decarbonisation and to make long-term investments. That price enabler is made stable by storage. The crux, therefore, of building this future energy system is to build transmission and storage of the key vectors that we want to use in the future. Therefore, it would be very valuable for the UK to develop a plan to commission and build out a strategic national clean energy reserve. That can be left to markets, but the Government need to drive it with an extremely strong and firm grip and with a clear vision. I urge the Minister to look at the ways that we can build on our current work in storage, while expanding it with a very clear and ambitious vision.

We can also start blending. Blending is sometimes misunderstood. There are currently investigations into blending hydrogen into our natural gas supply. That has a small benefit for decarbonisation, but it has a huge benefit for allowing us to build out production of hydrogen, because it gives producers a large and available sink for their hydrogen to be produced and sold and it allows them to build large-scale production with the certainty of a market. Blending is therefore a key enabler not of decarbonisation but of building production for a future energy system with hydrogen playing a major role.

It is also vital that we take action to fill the remaining gaps. Through my experience as an engineer working in research and development I have seen personally how powerful it is when the Government set goals and work in partnership with industry to try to meet those goals. Goal setting cuts through the noise of the usual business of research and development and the competition for investment, and it allows us to move forward. It has put the UK in an incredibly strong position.

The UK is already the leader in hydrogen standards, and with the publicly available specifications 4444 series, it is leading the way in establishing technical standards. We have an opportunity to build those out up to the norms of the British Standards Institution and the International Organisation for Standardisation. The UK has led and is leading that. The UK has led on technology with a series of first-in-the-world projects in hydrogen over recent years, and we have an opportunity to lead through our geography with a well-established oil and gas industry ready to transition with fantastic geology for salt cavern storage.

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[Jamie Stone (Caithness, Sutherland and Easter Ross) (LD)]

It is a pleasure to serve under your chairmanship, Mr Betts. I congratulate the hon. Member for Worcester (Tom Collins) on a very timely debate indeed; he knows his subject, and that is to the benefit of us all. Touching on the contribution made by my hon. Friend the Member for Bath (Wera Hobhouse), if we had mentioned hydrogen aviation prior to about 1940 it would have had people screaming in fear, because that was the era of the Hindenburg and the R101. The hon. Member for Worcester is absolutely correct that the potential for air transport is massive; the fact that when hydrogen and oxygen are combined we get water means that it is the cleanest of all forms of energy.

I made mention in my intervention of the production of ammonia. If my chemistry lessons have stuck, I think it is NH₄, which can then be turned into fertiliser. Our farmers are very worried by the increase in fertiliser prices, and it looks as if they are going up again this year. That can play merry hell with their farm accounts as they try to forward guess what their profitability will be. We know that EU tariffs on Russian fertiliser mean an increased price for EU countries. My point is a simple one: the more we can promote the manufacture of fertiliser out of ammonia from hydrogen produced in the UK, then the better that will be for this country. We have a great export opportunity.

I give great credit to the previous and present Governments—my constituents are very grateful to them—for having had the courage to go for Cromarty Firth and Inverness green freeport. The idea producing hydrogen was part and parcel of formulating that bid to the previous Government, and of the way we talk to the present Government. The experts in the field have been telling me that the potential for bulk hydrogen to be sailed across the North sea from the north of Scotland to very keen markets in Europe is huge, and that there is real money to be made here. When the bids were put together, the production of green hydrogen was part of that bid.

The Minister, whom I, like the hon. Member for Strangford (Jim Shannon) am very glad to see in his place, knows full well that the issue of the grid we are proposing—where the pylons and lines go, whether they are sub-sea or above the ground, the batteries and all that—is a controversial and hot topic. However, I give him his due; in his previous incarnation he was as helpful as he could possibly be.

When the grid improvements were initially proposed, and yes we of course have to do that if we are serious about getting to net zero, I wrote to the then Prime Minister and the First Minister of Scotland to ask whether the proposals matched the production of green hydrogen that we are keen to do in the north of Scotland. I may or may not have got the formula for ammonia right but, if I remember my physics correctly, the longer the distance one has to send electricity down a wire or a cable, the more energy is lost. Is it I²R? It is something like that; I have probably got it wrong, and the Minister probably knows it better than I do, but the point is that the longer the cable, the more resistance, and energy is lost because heat is produced and radiates off it.

I earnestly say to the present Government, looking at the production of green hydrogen in the north of Scotland, “Would it not make sense to produce an awful lot of that as near as possible to where the energy is actually being created?” We have a plethora of wind farms in the north of Scotland. We have the Beatrice wind farm off the coast of my constituency and there are many others up and running or projected for Scotland. It seems to me that the manufacture of hydrogen as near as possible to that source of energy would make enormous sense.

[Tom Collins]

The hon. Member is entirely right. One of the key questions often asked about green hydrogen is cost. There are many projections showing cost coming down dramatically in future, and part of that comes from the fact that hydrogen production is able to utilise renewable electricity that would otherwise be constrained or not used. He is entirely right that geographical and time constraints on when energy is produced are vital, but create a low-cost source of energy for the production of hydrogen, which brings the cost of hydrogen down, so I thank him for his point.

[Jamie Stone]

I thank the hon. Member for his helpful intervention.

I want to conclude with two points. First, I am optimistic that this is a subject that will enjoy cross-party support—I cannot see anyone rocking the boat on this one; it would be madness to do that—and sometimes, when things have cross-party support, they really can happen. There is a great opportunity in this country.

Secondly, to make an unashamed, blatant advertisement for my constituency, as Dounreay decommissions, we have sites and skills particularly near to where the energy is being created. If the His Majesty’s Government would look at the creation of hydrogen in my patch, I would be most awfully grateful. With that blatant touting for business, I conclude my contribution.

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[Jim Allister]

Yes, I am happy to agree with that. It feeds into this point: the Government talk about their industrial strategy, which is good, but that strategy needs to energise the infrastructure in synchronisation with the technologies we are using. When it comes to hydrogen, part of that industrial strategy needs to focus more on ensuring that we have the supply infrastructure to enable the deployment of the buses and other vehicles that we can readily produce to use of hydrogen.

[Jamie Stone]

We all want to see electric vehicles being used as much as possible, because that is part of getting to net zero. However, in a far-flung constituency such as mine, it is significant that a hydrogen-powered car has a greater range than an electricity-powered car. That backs up the argument the hon. and learned Member is making.

[Jim Allister]

The range for hydrogen is excellent, but when drivers get to the end of that range, they need somewhere to refuel it readily. The refuelling is quick: a hydrogen bus can be refuelled in 10 minutes. It is not a lengthy process, as it sometimes can be for electric buses. The technology for hydrogen is good and is developing at pace, but the infrastructure is the drawback. That is what is holding us back.

I say to the Government: let us do it in tandem. Let us of course continue to develop the excellent technology that we have, and the world leaders that we have in it, but let us synchronise that with ensuring that the infrastructure is there to match it.

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[The Minister of State, Department for Energy Security and Net Zero (Michael Shanks)]

It is a pleasure to serve under your chairship, Mr Betts—and to still be here as the Energy Minister. It is the only Government job that I wanted to do, which is perhaps just as well given how the reshuffle has landed, so it is genuinely a pleasure.

As I have often said, these debates are a great example not only of how we come together to talk about quite complex topics relating to the energy system, but of how this part of Parliament works. I always come out of these debates having learned something, as the shadow Minister said. Sometimes it is quite a niche fact that I am not quite sure what I will do with. I always learn a huge amount from my hon. Friend the Member for Worcester (Tom Collins), given his detailed knowledge of the industry and its practical application, which is often lost in our debates. I thank him and my hon. Friend the Member for Rushcliffe (James Naish), who also worked in the energy sector, and whose constituency was home to Britain’s last coal power station, the closure of which I attended last year. His understanding of the importance of the transition and the potential of future clean energy technologies is hugely welcome.

It has been an interesting debate not least because, as the shadow Minister said, we have had a degree of consensus. We once had consensus on quite a lot of things in respect of the future of our energy system, but that has somehow changed in the last few months. I will leave it to others to judge why that is, but it is really important that, given the huge opportunities for the future of the country and for thousands of jobs, there is a degree of consensus. As the hon. Member for Caithness, Sutherland and Easter Ross (Jamie Stone) said, we get things done when there is a degree of consensus, and that is hugely welcome. The hon. Gentleman referred to Joule’s law on the loss of power, which I think, if my standard grade physics holds up, is P = I²R,. I am sure people will correct me when that is typed up in Hansard.

Let me say a bit about our commitment to hydrogen before I respond to some specific points. We have been clear that hydrogen will play a fundamental role in the future of our energy system. Not only is it a crucial part of how we decarbonise heavy industry and transport, which are among our most energy-intensive and hardest-to-decarbonise sectors, but it is, as many Members have pointed out, part of our work to provide large-scale storage for our baseload of year-round clean power. As the Government have set out in everything we do, our mission to achieve clean power by 2030 and to maintain that relates to tackling the climate crisis, delivering energy security and reducing our dependence on unstable, volatile fossil fuel markets. How we take back control of our energy supply and storage will clearly be a critical part of that. It can also help us to reduce system costs as both electricity demand and renewable generation increase.

There are other great other examples of the use of hydrogen. The hon. and learned Member for North Antrim (Jim Allister) made the really interesting point that the world’s first hydrogen double-decker bus was made in North Antrim, which I had not realised. As the shadow Minister pointed out, there are challenges around how we maintain such innovation and make sure that it continues to work in the future. Last week I was in Denmark to meet European Energy Ministers. It was really interesting to see examples there, as well as at the port of Amsterdam in the Netherlands, of where infrastructure is being rolled out, while facing some of the same challenges about how we achieve the scale that makes it competitive. That is part of the work we will have to do.

We are acting now to seize the economic and industrial benefits of the hydrogen sector, which is why we have been not only pushing forward on our policy framework but trying to make clear our ambition. There is much more to be said about that, but there has been industrial and investor interest in our hydrogen allocation round programme. The first HAR1 projects are now putting spades in the ground, with the first wave expected to access more than £2 billion over the next 15 years in revenue support from the hydrogen production business model, and over £90 million in capital from the net zero hydrogen fund. Over £400 million of private capital has been committed up front for 2024 to 2026, with more than 700 direct jobs created in construction and operation. Those are among the first commercial-scale hydrogen projects in the world to take a final investment decision, and we expect them to become operational between this year and April 2028. That will kick-start our green hydrogen production at scale.

Following the success of HAR1, we expect to announce successful projects in the second hydrogen allocation round in early 2026. The current shortlist includes innovative projects that could support ammonia production in Shetland, produce new clean energy at Grangemouth and decarbonise lime kilns—one of the first steps in cement production—in the Humber area. Moving forward, in June this year we published our industrial strategy, which set out plans for the further hydrogen allocation rounds, HAR3 and HAR4, for our first regional hydrogen network, and for the launch of the hydrogen-to-power business model in 2026.

My hon. Friend the Member for Worcester talked about the crucial role that storage will play in the renewable energy we are building. The question of how we store that for when we need it is crucial. We laid out our plans in the industrial strategy, backed up by the spending review, with £500 million for hydrogen infrastructure, partly to look at how we unlock hydrogen’s potential for clean power and provide home-grown energy and good jobs. We also have an ambition to deploy the first regional hydrogen transport and storage network, to become operational from 2031, which will aim to connect producers with vital end users such as power for the first time. This will unlock hydrogen’s role in clean power and help to realise the potential of large-scale hydrogen storage in maximising renewable energy use to support the transition to a decarbonised energy system. We are also currently designing a hydrogen storage business model, alongside a hydrogen transport business model, with the intention of providing investors with the long-term revenue certainty that many Members have raised in the debate.

There is no doubt that the clean energy transition is the economic opportunity of the 21st century. This is about not just our energy security but, as many hon. Friends have pointed out, how we deliver the good, well-paid, trade-unionised jobs of the future. It is about how we reindustrialise communities that have for too long been left behind. The UK is well placed to be a global leader not only in hydrogen deployment but, crucially, in making sure that we capitalise on the supply chains, which is where we get the jobs, given the shared skills, experiences and qualifications in the existing oil and gas sector, our strengths in advanced manufacturing and innovation, and the policy environment we have set out.

We have taken significant steps to attract inward investment, and the public finance tools set out in the clean energy industries sector plan will play a crucial role. We have also looked at the question of skills, which a number of Members raised earlier. The Lib Dem spokesperson, the hon. Member for Thornbury and Yate (Claire Young), made the point very well. The hydrogen skills framework, which we published just a few months ago in April, is an open-source framework to try to enable the development of new qualifications and training programmes, in conjunction with industry, to make sure that we are bringing forward the apprenticeships and the skilled workers of the future.

We are also making sure that companies can access international markets and collaborate with global partners. We want to build a domestic success story by exporting hydrogen equipment and services across the world and reinforcing their role in global hydrogen supply chains, with the UK set to benefit from being right at the forefront of that work.

As the sector grows, we want to make sure that it benefits from the comprehensive public finance offers that we have set out. I will cover that briefly, because we have debated many of these things in the past. Part of that includes Great British Energy, with its £1 billion clean energy supply chain fund, which will be aligned with the clean energy industries sector plan to support companies that have the potential to grow in supply chains.

We have empowered the National Wealth Fund with a total of £27.8 billion in capital to enable it to take on higher-risk investments, including equity. It will invest in capital-intensive projects, businesses and assets, with at least £5.8 billion on carbon capture, low-carbon hydrogen, gigafactories, ports and green steel over the lifetime of this Parliament. We have also launched £4 billion in British Business Bank industrial strategy capital to scale up the financing package, and we introduced the clean industry bonus following the success in the round that we have just concluded. We are looking at whether we should expand that to hydrogen, and we will consult on that in due course.

We will continue to do all that we can to put the UK at the forefront of the global hydrogen revolution and thereby unlock billions of investment, create new-generation jobs, build the infrastructure and drive the clean growth that we—there seems to have been consensus today—all want to see. This autumn, we will publish the UK hydrogen strategy, which will be evidence-led, impact-focused and designed on the premise of fast-tracking delivery.

Since the publication of the last hydrogen strategy four years ago, the landscape has evolved significantly. Electrification technologies have moved on rapidly, pointing to a more focused and essential role for hydrogen, complementing the electrification that we will see in so much of our energy system. The new strategy will sharpen our priorities, deepen collaboration with industry, which is key to this, and seek to unlock the full potential of hydrogen over the next decade.

[Jamie Stone]

Does the Minister agree that we should at least check the proposed grid improvements against the possible strategic sites where hydrogen could be made?

[Michael Shanks]

My very next point was on the future of the network. It wasn’t, actually, but I will come to it now, because the hon. Gentleman made a very good point, which I meant to come back to. He is right, of course, that we need to invest in the grid—even if we were not embarking on this clean power mission, the grid is very much in need of upgrading—but we want to take the strategic planning of that much more seriously than it has been taken in the past.

We know that we need to build significant amounts of grid—the hon. Gentleman recognised the importance of that—but we also want to plan the future of the energy system strategically so that the grid follows a logical way to build out the energy system. His point about trying to make use of the abundance of clean energy to transfer it into hydrogen as an off-taker was well made. It will feed into the work on the strategic spatial energy plan. It is about how we best use all the energy system to our advantage. It is also about how we can reduce things like constraint payments and make use of it as efficiently as possible. That is an important point that we will take forward.

To conclude, our vision is clear: a thriving low-carbon hydrogen economy—one that decarbonises those hard-to-electrify sectors, strengthens our energy security and fuels good jobs and growth across the country—is at the heart of the Government’s mission.