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Since our last new energy letter, the shift in focus has moved from the impact of the Covid-19 crisis, to how we recover – and how “green” this recovery is. I have growing confidence that the recovery will drive acceleration in some aspects of the energy transition. There will of course be major economic challenges ahead, and the energy sector is not immune to these - but the fundamental drivers of the energy transition remain unchanged. It is encouraging to see signs of a commitment to “building back better – and greener” from Brussels and in some European capitals. The decisions being made now will determine the speed and nature of the energy transition over the years and decades ahead – and as such, influence business models, strategies and opportunities for companies in new energy.
The most detailed glimpse so far of just what this recovery will look like, was revealed in the European Commission’s Recovery Plan to “repair and prepare for the next generation” – which sets aside €750bn for a Green Recovery (plus longer-term budget reinforcements). It clearly signals that this recovery should be clean, circular, competitive and climate neutral. So what does this mean for new energy? Five points catch my interest, which create fantastic opportunities for the energy industry, if it is ready to capture them.
The potential for hydrogen is emerging
There is a range of stakeholders across the energy landscape looking at hydrogen through a new lens. Why the fuss? Simply put, hydrogen has the potential to help us solve some of the most pressing energy challenges in the decades to come. However, the timeline is important, therefore ‘decades’ is the key word here, as it is unlikely that pure hydrogen will be flowing through the gas mains or into your car in the next few months or even the next few years. But there is huge potential. Hydrogen is an energy vector that can be used for a range of heat, transport and power generation applications. See Cate Lyon’s blog for more on hydrogen and its relation to domestic heat here. The big question is where can it best be used?
Delta-ee may have been early to the conversation. We started talking 10-15 years ago about decentralised energy, customers not meter points; who has needs, wants and preferences, services beyond commodity. These dynamics have now firmly moved from being on the periphery of the debate to front and centre. Most companies now recognise the direction in which the market is heading, and it seems like we are approaching the cusp of change.
Developing the right strategy and tactics is however challenging – exciting, but challenging.
There is a strong potential future for hydrogen as a means to decarbonise heat, according to the reports published by the UK’s Committee on Climate Change (CCC) on 22nd November. Hydrogen is painted as one of the three key solutions (alongside electrification and improved energy efficiency) which will help the UK both decarbonise heat and create more energy system flexibility. This supports Delta-ee’s view that the best route to decarbonisation of heating is likely to be a ‘balanced transition’ across a mix of technologies and fuels.
As our Gas Heating Service highlighted recently, the UK is already one the most active countries in Europe regarding the development of hydrogen for heating: see projects including H21, Hy4Heat, HyNet, HyDeploy and H100. This latest report by the CCC only strengthens the argument that hydrogen could play a key role in heat, as well as in other sectors like transport and industrial processes.
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