Cost reduction pathways of green hydrogen production in Scotland

Green hydrogen, produced by electrolysis exclusively with renewable electricity, is expected to play a key role in the Scottish Government’s mission to achieve net zero emissions targets.

Hydrogen is a versatile energy vector that can be used in a range of applications without emitting carbon dioxide at the point of use.

Scotland has set an initial ambition of producing at least 5 gigawatts of renewable and low-carbon hydrogen by 2030 and 25 gigawatts by 2045.

Meeting these targets will not only contribute to emissions reductions but also has the potential to safeguard future industry and employment. Scotland’s geography, geology, infrastructure, and expertise make it particularly suited to rapidly developing a low-carbon hydrogen economy. This could see Scotland become a global leader in hydrogen, and secure economic opportunities across the UK.

This report explores the costs of producing green hydrogen in Scotland. It considers the key drivers of cost and explores how the production cost and the supply chain could develop to 2045.

The study investigated each part of the supply chain, to understand the current costs and barriers, as well as to identify where policy support could help the green hydrogen economy to grow.

It has defined four hydrogen production pathways which reflect the main supply chain models that are expected to emerge in a green hydrogen economy: centralised system, distributed pahtway, export model and decentralised model.

Main findings and recommendations

• The cost of hydrogen is expected to at least halve between 2022 and 2045 for the three pathways connected directly to wind farms.
• Electricity costs are the biggest driver of hydrogen cost reductions from 2030 onwards.
• Scaling up the industry is expected to lead economies of scale and drive manufacturing cost savings across the supply chain.
• Domestic infrastructure to transport hydrogen is currently limited and needs to be rapidly developed to ensure the continued emergence of the green hydrogen sector in Scotland.
• Price competitiveness with natural gas in industrial-scale applications is unlikely before 2045 without government support.
• Subsidy support will be required to encourage adoption of green hydrogen in the short term.
• Scotland has potential to become an exporter of hydrogen to Europe.