Scotland stands at the cusp of a generational opportunity – to become a global leader in green hydrogen. But that ambition is somewhat tethered to the success of ScotWind.
If ScotWind stumbles, so too does Scotland’s hydrogen future – and with it, an economic and environmental prize of enormous scale.
The vision for Scotland is clear, and hugely exciting. Offshore wind provides the clean electricity that enables large-scale green hydrogen production. This hydrogen can support the decarbonisation of heavy industry, transport and, crucially, become a major export commodity.
But if ScotWind does not go ahead as planned – due to regulatory roadblocks, investment hesitancy, or a policy mis-step by either of our governments – then the entire scale of the hydrogen opportunity is impacted.
Without abundant offshore wind power, Scotland’s ability to produce competitive green hydrogen risks being undermined. The knock-on effects are profound. Supply chains stall, infrastructure investment dries up, and international markets look elsewhere.
One of the most pressing threats to ScotWind’s viability is the current suggestion that the UK government is exploring a move to zonal pricing for electricity.
Currently, the UK operates under a national pricing model, meaning electricity generators in Scotland receive the same wholesale price as those in England.
However, under a zonal pricing system, the price of electricity would vary by region, and Scottish generators – particularly offshore wind developers – could face significantly lower revenues due to their geographical location.
This would make Scottish based projects less cost competitive and, in turn, jeopardise the entire ScotWind rollout. Those are not my words – this is what some very big players in offshore wind are saying.
The implications of this change to a zonal pricing system cannot be overstated. If offshore wind developers cannot secure viable revenues, projects may be delayed or even scrapped.
The result? Scotland’s hydrogen ambition will slow down before it gets to the starting line. While the UK’s hydrogen future does not wholly depend on large-scale offshore wind power at commercially viable rates, the production of affordable green hydrogen at the ambitious scale being proposed will be impacted.
Barriers to progress
The green hydrogen sector is already facing challenges on the demand side, such as the need for infrastructure development, high production costs, and difficulties in gaining market acceptance – for example, with lack of long-term off-take agreements.
The last thing the industry needs is to encounter additional challenges on the supply side, which could further impede the progress and delay hydrogen’s role in creating a cleaner energy landscape.
If Scotland fails to develop its hydrogen economy fast enough, it will cede ground to other nations that are moving quickly to secure their place in the global energy transition.
The Scottish government would also be left with an enormous hole in its energy strategy, which essentially has hydrogen export revenues replacing oil and gas in the coming decades.
The economic consequences cannot be ignored. Hydrogen presents a multi-billion-pound export opportunity for Scotland, with the potential to supply industrial hubs across Europe and beyond.
Missing out on this could cost thousands of jobs, deter foreign investment, and weaken Scotland’s broader energy industry.
Beyond economic loss, the climate imperative is stark. Green hydrogen is a cornerstone of net-zero strategies. Without it, hard-to-abate sectors will remain fossil-fuel dependent, and Scotland’s 2045 climate targets become increasingly difficult to achieve.
Offshore wind and hydrogen production are intrinsically linked, and dismantling the former through zonal pricing would impact the pace and scalability of the latter.
To maintain momentum in the energy transition and secure Scotland’s future as a hydrogen powerhouse, policymakers must ensure that ScotWind remains economically viable.
If we get this right, Scotland will export not just hydrogen, but leadership. If we get it wrong, the opportunity will be lost to more agile competitors.
Nicola Macleod is group general counsel at D2Zero, the decarbonisation and clean energy solutions group that is currently one of the fastest-growing companies in Scotland.