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Developing a Whole-Systems Approach To Explore Pathways to Net Zero

Assessing How a Hydrogen Market Will Operate Alongside Existing Energy Markets in the Energy Transition

While the role of hydrogen in the UK’s transition to net zero is highly uncertain and subject to debate, many consider that low-carbon hydrogen could complement the role of electrification– providing an energy source for end users where other low-carbon alternatives may be limited, and bolstering the resilience of the electricity system itself.

To support the critical conversations and decisions that will need to take place across industry, government and the wider policy environment, Centrica and FTI Consulting have worked together to develop a novel approach to analysing the energy system.

Our analytical approach builds significantly on FTI Consulting’s detailed and geographically granular electricity market model. This model sits alongside gas and hydrogen models, which incorporate key assets and sources of demand and supply in those markets (such as gas pipelines, electrolysers and hydrogen-to-power generating plants). The granular design of each of the market models enables us to assess them through a “whole-systems” approach, explicitly considering the key interactions such as electricity prices and hydrogen production from electrolysis, gas prices, and electricity generation from hydrogen.

Infographic displaying the key inputs and assumptions from a range of third-party sources, including NESO, National Gas, ENTSO-E and the Crown Estate

Source: FTI Consulting analysis

In this study, we set out how this approach can be used to assess different net zero decarbonisation pathways. We also highlight several key insights regarding the role of hydrogen, emphasising that much of its value is driven by how it can complement the electricity sector – being produced from electricity generated from surplus wind in locations and periods where it is especially windy; and subsequently converted back to electricity to balance the system when and where it is needed, for example during low wind periods. For hydrogen to play this role, sufficient hydrogen transport and storage capacity will be required to facilitate a well-functioning hydrogen market, which we explore in detail as recommended policy priorities.

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