Case Study
In line with the wider Scottish target, Aberdeen City Council (ACC) are aiming to hit net zero in 2045. However, with the oil and gas (O&G) industry and wider supply chain accounting for around half the jobs in the region, the council are having to think carefully about how to ensure a just transition.
Alongside the build-up off offshore wind, ACC are aiming to stimulate the production of Green Hydrogen in the region. As well as providing some ‘anchor demand’ to kick start the industry, they have formed a joint venture with bp to build a Hydrogen Hub with related solar farm on the site of a former landfill.
Challenge – kick starting a green hydrogen economy
Hydrogen is likely to play a key role in our transition to net zero, primarily as a means of ‘storing’ energy produced by renewable sources – and then turned back into energy again when there is insufficient wind / sun to supply sufficient clean energy to the grid.
Supplying this green hydrogen is a big opportunity area, and a good fit for Aberdeen since lots of legacy O&G skills and supply chain are applicable in this sector. The North Sea Transition Deal estimated that 68% of existing O&G jobs could retrain in renewables and a more recent report by Robert Gordon University puts the figure as high as 90%.
However, at present the large-scale storage infrastructure required for ‘grid balancing’ is not available and not projected to be in place until 2030. Therefore other ‘use cases’ for green hydrogen are helpful in terms of stimulating demand. These include using hydrogen in fuel cells which can then power vehicles. Aberdeen’s First Bus has a fleet of 15 hydrogen powered buses, and the council has a fleet of over 35 other vehicles (with a plan to increase this to 104 by 2027), including waste trucks.
ACC are using these vehicles to provide some ‘anchor demand’ for green hydrogen production and support the development of a new green Hydrogen Hub which will be built beside Altens Industrial Estate on the coast of Southern Aberdeen.
Solution – joint venture with BP and scaled phase up plan
To be viable, green hydrogen produced in the Hub needs to be cost-competitive with diesel. Factoring in the value of providing Renewable Transport Fuel Certificates (RTFCs), the Hub is projected to meet this threshold.
However, the investment case has various other assumptions built in (that demand will expand, that the electricity price is £45/MWh) which represent risks that private sector operators were hesitant to take on.
ACC overcame this challenge by offering to provide some of the initial capital and inviting private sector partners into a joint venture (JV) with the council. There was significant interest with over 25 responses to the initial ‘Prior Information Notice’ and ultimately the council formed a JV with bp.
Impact – creating jobs in the green economy
While direct employment in the hub is projected to be relatively low at 20-30 jobs created, accounting for impacts on the wider supply chain and economy, more than 700 new jobs are projected to be created4 alongside over £700mn of gross value add to the economy. As noted above, many of these jobs will require skills already mastered by the legacy O&G workforce – for example, building and maintaining pipes for a distribution network – and as such provide alternative employment opportunities.
What next? – green H2 in production in 2025 and plans to scale
Production is due to start in 2025, supplying enough fuel for First Buses’ 15 (soon to be 25) fuel cell double-deckers and the council’s fleet of hydrogen fuel cell vehicles. There are then plans to expand production to serve burgeoning demand in the rail, haulage, and marine sectors.
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