Major Barriers to CCUS, Green Hydrogen Role in UK 2030 Plan
Experts sceptical on nascent technologies after government lays out plans for £25 billion of public sector finance.
Investors have been advised to view carbon capture utilisation and storage (CCUS) and green hydrogen as long-term prospects despite recent backing from the UK government and the National Energy Systems Operator (NESO).
Published yesterday, the NESO’s Clean Power 2030 report identified two primary clean power pathways to achieve the UK government’s goal of net zero electricity generation by 2030. One requires 50 gigawatts (GW) of offshore wind by 2030, but no new dispatchable power from hydrogen or CCUS. The other pathway involves 43GW of offshore wind, with new CCUS and hydrogen accounting for 0-3%, or 2.7GW, of 2030 supply.
In October, the UK’s Labour government confirmed almost £25 billion (US$32.6 billion) of funding for CCUS and green hydrogen projects, both ahead of 2030 and beyond, with the development of a UK hydrogen and CCUS economy potentially creating up to 97,000 new jobs by 2030.
“CCUS does have an important role to play under a number of potential UK net zero scenarios, but there’s an awful lot that needs to happen alongside it, and the same is true of green hydrogen,” Bruno Gardner, Head of Climate and Nature at UK-based long-term savings and retirement business Phoenix Group, told ESG Investor. “Most of what needs to happen for clean power by 2030 can happen without CCUS and green hydrogen.”
Frankie Mayo, Senior Energy and Climate Analyst at Ember, agreed that CCUS and hydrogen may have a minor role to play in transitioning to clean power by 2030, but that the technologies lack the proven scalability of renewable energy sources such as wind and solar.
“We need to see offshore wind, onshore wind, batteries and electricity pylons all being developed at faster rates than ever before,” he said. “All of those need investment and are guaranteed to be part of the clean power system in 2030, while CCUS and hydrogen are not and are more likely to be part of the clean energy system by 2040 or 2050.”
Budget boost
Last week, Labour’s first budget since taking office confirmed £3.9 billion of funding in 2025‑26 for CCUS Track-1 projects to decarbonise industry, as well as contracts with 11 green hydrogen producers worth around £2.3 billion. The government said the investment aims to support industry in kickstarting the CCUS and hydrogen industries, delivering clean energy investment and jobs.
This followed the government’s confirmation of a £21.7 billion investment to establish two major CCUS clusters over the next 25 years, both in the North of England, at the start of October. The funding is expected to draw in around £8 billion in private investment, generate 4,000 direct jobs, and support 50,000 long-term jobs in the region.
The projects have targeted a reduction of more than 8.5 million tonnes of CO2 emissions annually. However, there are no commercial applications of CCUS in the UK at present, while just five megawatts of green hydrogen projects are operational.
Both CCUS and green hydrogen were among the emerging technologies targeted by the UK’s National Wealth Fund launched in July which looks to combine public and private investment to back the development of nascent industries that help drive economy-wide decarbonisation.
Earlier this year, Labour also established GB Energy, a state-owned energy investment company, and lifted a de facto ban on new onshore wind projects in July.
According to NESO’s report, 77-82% of the UK’s energy mix is forecast to come from renewable energy for a clean power system in 2030, with the majority generated by offshore wind. The government wants the UK to produce 100% of its electricity from clean sources by 2030, which Fatih Birol, Head of the International Energy Agency (IEA), described as ambitious but achievable.
Risky business
NESO’s report stressed that reaching clean power by 2030 will require “bold action and sustained momentum”, including “first-of-a-kind” clean dispatchable technologies such as CCUS and green hydrogen.
The report grouped the two technologies in its clean power pathways due to large-scale hydrogen storage appearing unlikely before 2030 and relative costs for hydrogen and CCUS being uncertain. Despite this, NESO said the technologies offer “significant value” and that small levels of operational capacity would materially reduce the overall challenge for the rest of the programme.
NESO noted that both pathways will need a “dramatic acceleration in progress compared to anything achieved historically”, as well as up to £60 billion of network investment cumulatively by 2030 to build nearly 1,000km of onshore power lines and over 4,500km of undersea cables.
However, Lorenzo Sani, Power and Utilities Analyst at Carbon Tracker, said that CCUS will play “very little part in achieving the 2030 clean power target” and that Labour had “over emphasised” the role of CCUS.
“If I were a private investor, I would be sceptical of investing in CCUS because of its history, the technology, and its costs,” said Sani. “Those investments should only be focused on the sectors where there are no other alternatives to decarbonise, because some of the investments are very risky.”
CCUS has been credited with the ability to tackle emissions in hard-to-abate sectors, such as heavy cement chemicals and steel or chemicals, as well as enabling low-carbon hydrogen production and reducing its cost.
However, the technology has been held back by its high cost and energy intensity, the risk of carbon leakages damaging the environment, and it is yet to be proven at scale. CCUS has also been accused of being a method of greenwashing by fossil fuel firms, including by UN Secretary-General António Guterres, with the oil and gas industry having been an investor or project partner in more than 90% of CCUS capacity in operation around the world according to the IEA.
“Continuing investment in renewables like onshore and offshore wind and solar are the way to go,” he added. “We should give greater confidence to the sector, as well as tackling the grid, bottlenecks and investing in storage, which is the number one barrier.”
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