Unlocking the hydrogen market

Overcoming challenges in small-scale distribution.

The concept of a ‘hydrogen economy’ is no longer a distant vision; it is becoming a reality in the UK. With numerous stakeholders involved in the supply, distribution, storage, and use of hydrogen, the groundwork for a thriving hydrogen industry has been laid. However, the low carbon hydrogen market is still at an early stage and needs support to grow. One of the critical hurdles to overcome as the market grows is the efficient distribution of hydrogen from production sites to end-users at an acceptable cost. This challenge presents an opportunity for innovation and growth within the evolving hydrogen sector, since the small-scale distribution market has the potential to become a large market in the UK and globally. In this article, we delve into the complexities of small-scale hydrogen distribution, exploring the impact of existing challenges, and the promising solutions emerging in the UK.

The Impact: Holding Back Innovation and Deployment

Small-scale hydrogen distribution issues pose significant barriers to the innovation and widespread deployment of hydrogen technologies. Trials of novel hydrogen applications are sometimes postponed or cancelled due to the prohibitive costs associated with procuring the necessary hydrogen. Moreover, certain hydrogen-based technologies, especially those intended for remote applications, face deployment constraints in the absence of a reliable and cost-effective hydrogen supply chain. As a result, the potential for the UK to be at the forefront of hydrogen innovation and deployment may not be realised. The following challenges would need to be overcome to resolve the issues of small-scale distribution.

The Challenges

Distributing hydrogen from production hubs to end-users reliably, affordably, and safely can be challenging at any scale, but there are some particular challenges in the current UK small-scale hydrogen market:

  • Reliability and Availability

Balancing the supply and demand of the emerging low carbon hydrogen market presents a challenge. Many producers opt for large-scale offtake contracts (large quantities over long time periods), as these offer financial security. The first government hydrogen allocation rounds have also encouraged this approach to ensure offtake is guaranteed for these early projects. However, this limits the amount of hydrogen available to the small-scale market. On the demand side, without sufficient diversity and number of end-users and/or storage solutions, significant fluctuations in demand reduce the effectiveness of the market. Storage and transportation hardware (pressure vessels, manifolded cylinder pallets, and tube trailers) can also be in short supply at times, limiting the ability to distribute hydrogen.

  • Affordability

Currently in the UK, acquiring small quantities of low carbon hydrogen often necessitates bespoke contracts for each purchase, which takes time and resource, and means there is little price transparency. For very small quantities, such as individual cylinders of hydrogen, there is only one major supplier and distributor at present (and this is predominantly not low carbon hydrogen). These factors, as well as the physical constraints of hydrogen which make transporting small quantities inefficient, contribute to a very high delivered cost per kilogram, hindering accessibility for potential users.

  • Safety

Any system transporting hydrogen must follow the ADR[1] and ADN[2] regulations for the transport of dangerous goods via roads and inland waterways. These have small load exemptions which simplify the logistics required for small-scale distribution of hydrogen. There is a barrier for small companies new to this market in understanding and utilising these regulations, and it is essential that all remaining obligations are met to ensure safe transport.

The Opportunity: Solutions in Sight

Initiatives are underway in the UK to address the challenges of small-scale hydrogen distribution. For example, organisations such as Hydrologiq, who provide hydrogen generator powered electricity for off-grid sites, are spearheading efforts to standardise contracts and streamline procurement processes for medium to small quantities of hydrogen. Additionally, the establishment of exchanges or networks can facilitate hydrogen trade, enhancing accessibility for both suppliers and users. For instance, Network Hy focuses on individual cylinder markets, diversifying the supplier base to enhance reliability and reduce delivered costs significantly. HDEX is currently developing a trading platform designed to facilitate more efficient connections between global buyers and sellers. This platform will automate critical phases of the contracting process, boosting market transparency and efficiency.

To address the challenge of storage and transport hardware, there is an opportunity for UK companies to develop and manufacture the necessary equipment, which will have a growing market in the coming decades. In particular, there are a number of UK composite manufacturing SMEs who could develop their capabilities to produce pressure vessels for small-scale distribution of hydrogen.

Conclusion: Driving the Hydrogen Economy Forward

As we strive to cultivate a robust hydrogen economy and innovation ecosystem in the UK, the significance of small-scale hydrogen distribution should not be underestimated. Solving this challenge would have a considerable impact, enabling hydrogen technology development and deployment in the UK, and unlocking further investment in the domestic hydrogen sector.

Next steps for the UK to overcome these challenges and realise the full promise of hydrogen innovation for the domestic economy include:

  • Support and development of hydrogen trading platforms
  • Development of guidance on how to follow regulations for transporting hydrogen in small quantities
  • Exploration of opportunities for UK-based design and manufacture of hydrogen storage and transportation hardware

The Hydrogen Innovation Initiative partners will continue to investigate the small-scale distribution challenge and support UK industry on the journey to a thriving low carbon hydrogen market.

If you are interested in this topic, or have any insights to share with the HII team, please contact:

[email protected]

[1] Agreement Concerning the International Carriage of Dangerous Goods by Road 

[2] European Agreement concerning the International Carriage of Dangerous Goods by Inland Waterways

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