By Insider.co.uk

Copyright insider

Hydrogen could be Scotland’s next transformative energy opportunity, with the potential to deliver 3.3 million tonnes annually by 2045.

The benefits are clear: a vast new export industry, significant progress toward net zero and thousands of high-value jobs across the supply chain.

Yet, while the ambition is vast, the story so far has been one of hesitation rather than acceleration.

Recent moves by companies such as Statkraft and Gravitricity showcase both the promise and fragility of the sector, with Statkraft’s pause on new European projects serving as a sharp reminder of how fragile investor confidence remains.

The challenge lies not in the vision, but in the risk profile.

Hydrogen projects are capital intensive, heavily reliant on new infrastructure and built on long-term legal commitments. If supply is not ready when off-take obligations fall due, or if projects are delayed, the issue is that no one party wants to be left bearing the loss.

For investors, this imbalance is concerning. Smaller developers also struggle to justify this exposure, while larger players hesitate to commit without stronger signals that risks will be shared fairly.

Ambition alone will not unlock investment and progress in this industry.

With the market facing issues on all fronts – high production costs, grid and infrastructure limitations, technology and scale up risks – it is robust legal and regulatory frameworks that can mitigate such risks and make clear steps towards making projects bankable.

The UK has begun to address this through mechanisms such as the Low Carbon Hydrogen Agreement – part of the Hydrogen Production Business Model – which provides long-term revenue support for early projects. These contracts represent an important step toward growth, but more is needed.

Larger energy companies have a central role in providing stability and structure to the hydrogen market.

With greater financial backing and established expertise in other energy markets, they are better placed to absorb early risks and to work directly with government in testing, refining and standardising the contractual models that will give financiers confidence. By proving that these frameworks work in practice, they can create a template that smaller firms and innovators can adopt at lower risk.

At the same time, government must take a more active role in managing the risk.

Revenue support, guarantees and an overhaul of existing legal processes, particularly in planning and infrastructure, can de-risk projects at the early investment stage, ensuring that Scotland’s hydrogen market is not left behind. The passing of the Energy Act 2023 has already laid the groundwork for licensing hydrogen production, transport and storage – and consultations on a dedicated hydrogen network code signal progress.

If these pieces come together, the rewards will be substantial.

Scotland could establish itself as a world leader in hydrogen, attract billions in investment, create a new generation of jobs and anchor its place in the global transition to clean energy. But if clarity is not provided, investors will look elsewhere.

Hydrogen has the potential to define Scotland’s energy future. To turn that potential into reality requires more than ambition. It requires legal clarity, risk-sharing and frameworks that turn costly risks into investable projects.

With the right structures in place, Scotland’s hydrogen story could finally accelerate.

Jennifer Kerr is an associate in the energy and renewables team at law firm Morton Fraser MacRoberts