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Procurement and the UK Hydrogen Strategy

Kyle Duggan, Victoria Croshaw, Emily Heard analyse procurement issues in relation to the use of hydrogen in the transport sector.

In November 2020, the Government published its Ten Point Plan for a Green Industrial Revolution which set out the UK’s aim to develop 5GW of low carbon hydrogen capacity by 2030. Following on from this, on 17 August 2021, the Department for Business Energy & Industrial Strategy (BEIS) published its UK Hydrogen Strategy (the Strategy) which sets out “what needs to happen to enable the production, distribution, storage and use of hydrogen and to secure economic opportunities” across the UK. The Strategy is split into 5 Chapters covering a number of different topics.

In Chapter 2, the Strategy explores the sectors which hydrogen is likely to have the biggest impact on in the future, namely, industry, power, heat in buildings and transport.

This short article focusses on the transport sector.

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The role of hydrogen in the Transport Sector

The Strategy outlines that transport has been a crucial and leading early market for hydrogen in the UK. BEIS also places transport as one of the biggest components of the hydrogen economy in the future and expects hydrogen vehicles, particularly depot-based transport including buses, to constitute the bulk of 2020s hydrogen demand. By 2030, BEIS envisage hydrogen to be in use across a range of transport modes including HGVs, buses and rail along with early stage uses in commercial shipping and aviation.

In order to facilitate this, throughout the 2020s, the Government is taking forward a programme of development and demonstration of hydrogen technologies across different transport modes. The Strategy contains a number of pointers for the ways in which public procurement spending is likely to flow in the future which market participants may wish to bear in mind as they position themselves for public procurement opportunities.

Buses

The Government has agreed to deliver the National Bus Strategy which has a vision of a green bus revolution, including setting an end date for the sale of new diesel buses and running the Zero Emission Bus Regional Areas (ZEBRA) scheme. ZEBRA will provide up to £120 million in 2021/22 to Local Transport Authorities (LTAs) to begin delivery of 4,000 new zero emission buses, either hydrogen or battery electric, and the infrastructure needed to support them.

Phase 1 of ZEBRA has now closed. The LTAs selected to progress to Phase 2 have been announced and these LTAs must now create a business case for investment. A full list of the LTA’s who have progressed to Phase 2 can be found here.

Rail

The Strategy notes that this is already one of the greenest ways of moving people and goods and that the Government is committed to making it even greener, in line with its net zero target by 2050. To decarbonise currently unelectrified parts of the network, electrification will likely be the best solution because electrified trains are faster, quicker to accelerate, more reliable and cheaper.

Heavy Goods Vehicles

Large long-haul HGVs are the most challenging segment of the road sector for developing zero emission options due to their long journey distances. The Government will invest up to £20 million this financial year in designing trials for electric road system and hydrogen fuel cell HGVs and to run a battery electric trials to establish the feasibility, deliverability, costs and benefits of these technologies in the UK.

Multi-modal Hydrogen Transport Hub

The Strategy also notes that areas with particularly strong hydrogen potential could help improve understanding of the role of hydrogen in transport. The Government has therefore invested £3 million into the UK’s first “Hydrogen Transport Hub”. The Hub will be comprised of a set of facilities for the production, storage and distribution of green hydrogen, linked to a network of hydrogen refuelling stations that will service operational trials across transport modes in the period 2025-2030. [1]

Future Opportunities

With the vast investment promised by the Government in relation to the Transport sector and the emerging hydrogen market, there is likely to be increased opportunities for suppliers within the transport sector to compete for contracts but also to influence the development of procurement strategies by seeking out and participating in market engagement exercises. For contracting authorities there is the opportunity to develop strategies that will provide infrastructure likely to be essential for the future and to attract keen bidders able to offer innovative solutions in this new and developing market.

Kyle Duggan is an Associate, Victoria Croshaw is a solicitor and Emily Heard is a partner at Bevan Brittan.

[1] Tees Valley Multi-Modal Transport Hub Masterplan (March 2021).


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