AIM-listed UK Oil & Gas (UKOG) has recently announced strategic support for its Dorset and Yorkshire underground hydrogen storage projects from RWE, a leading energy company.
RWE’s letter of support (LOS) outlines several potential benefits of UKOG’s hydrogen storage projects. These include offering firm hydrogen supply contracts, managing production outages, optimizing electricity costs, and smoothing hydrogen production profiles. While these points highlight strategic advantages, it’s crucial to consider the broader industry context.
The concept of hydrogen storage is not new, and various global benchmarks can be referenced. For example, the Advanced Clean Energy Storage project in Utah, USA, aims to store 100 megawatts of hydrogen, significantly larger than many early-stage projects in the UK. The effectiveness and scalability of UKOG’s projects must be critically compared to such benchmarks to gauge their true impact.
Geographic and Pipeline Proximity
UKOG’s storage projects are strategically located near RWE’s planned green hydrogen plants in the Solent Cluster, Didcot, and Teesside. This proximity is touted as beneficial for storing excess renewable power-generated hydrogen. However, the actual logistical and infrastructural challenges associated with this integration need thorough examination. Proximity alone does not guarantee seamless operation without substantial investment in supporting infrastructure.
Alongside RWE, UKOG has secured support from Sumitomo and SGN. These letters will be pivotal in their application for government hydrogen storage Revenue Support. However, it is important to scrutinize the tangible commitments these letters represent. While they indicate potential interest, they do not guarantee project success or government funding.
UKOG’s projects are still in the early engineering design stage, and there is no certainty of receiving government Revenue Support. The competition for such support is fierce, with numerous projects vying for limited funding. UKOG must demonstrate not only technical feasibility but also economic viability and alignment with national hydrogen strategies.
