Analysing the economic opportunity for Aberdeen of hydrogen energy sector development

Summary

Hydrogen is an emerging energy fuel source that may, via associated ongoing technological and sectoral development, provide multiple opportunities and threats facing the wider energy sector. Upstream petroleum companies looking to diversity their operational and/or investment portfolios, renewable energy operators with scope to produce “green hydrogen,” and electricity transmission and distribution companies and municipalities looking to adopt, or foster the adoption, of hydrogen all have a potential material stake in its emergence as a viable and zero emissions alternative fuel source to fossil fuels or, colloquially, “skin in the game.”

For the industry to truly take-off, production would have to happen at-scale, a large and diverse customer base would need to emerge and a vibrant supply chain servicing the sector, would all need to take place. Should these preconditions be met, Aberdeen would be a likely de facto UK Continental Shelf (UKCS) energy hub for the sector given its existing human and physical infrastructure and resources, a legacy of past and present UKCS upstream petroleum sector development regarding which it has long held pre-eminence alongside London.

However, there is no guarantee that upstream petroleum economic history will repeat itself with respect to hydrogen. In fact, key questions and uncertainties remain with respect to its economic viability, requisite political will, and the so-called “social license to operate,” i.e. broad societal acceptance and legitimacy.

This paper seeks to address the economic realities of hydrogen both as a fuel of the future and with respect to the potential for Aberdeen to reinforce its status of one of the UK’s two dominant energy hubs, alongside London, through achieving a leadership position in its development. Hence, it will address the political, social and economic threats to such sectoral development, including specifically with respect to Aberdeen, and analyse the possible and likely scale that the hydrogen economy may reach in the future.