Capital Investment for Green Hydrogen

THE UK government has announced support for 11 commercial green hydrogen projects which will see more than £400m of private capital invested in the UK green economy.

Among the winners of the UK’s first hydrogen allocation round (HAR1) is EDF’s Tees Green Hydrogen project, which gained support for 5.2 MW of green hydrogen capacity in the North East. In total, the awarded projects will deliver 125 MW of new hydrogen for businesses, with the government granting confirmed suppliers a price guarantee for the clean energy they supply.

In return for government support, the successful projects will invest £413m between 2024 and 2026, which is expected to create around 760 direct jobs during construction and operation.

The government said the projects are the largest number for commercial scale green hydrogen announced at once in Europe. It said it represents “the most significant step in scaling up the UK’s hydrogen economy to date – speeding up progress towards the government’s ambition to deploy up to 10 GW low carbon production capacity by 2030”.

Claire Coutinho, secretary of state for energy security and net zero, highlighted the economic opportunity of hydrogen, saying it will unlock “over 12,000 jobs and up to £11bn of investment by 2030”.

The ‘most significant step’ in scaling UK hydrogen

Lord Callanan, minister for energy efficiency and green finance, said:

“Today’s funding commitment represents a monumental step forward in helping producers to deliver a fuel of the future today, backing businesses to go greener. This will be essential to achieving our net zero targets and will benefit people across the UK with the job and investment opportunities that this funding will bring.”

The government also published a delivery roadmap setting out plans for future allocation rounds, opening a second funding round.

A roadmap for hydrogen production

Published yesterday, the production delivery roadmap sets out how government expects the hydrogen production landscape to evolve towards 2035, and the key opportunities and challenges the UK faces.

The roadmap sets out plans for funding allocation rounds in 2025 and 2026. It plans to boost hydrogen capacity up to 1.5 GW across these rounds, and award funding to projects that will help to deliver up to 4 GW of hydrogen enabled by carbon capture, use, and storage (CCUS) – blue hydrogen – as well as 6 GW of green hydrogen by 2030.

The government also acknowledged an important role for production technologies other that CCUS-enabled natural gas reforming and water electrolysis, on the road to scaling up hydrogen in the 2030s. It noted that it has already set out a technology neutral approach to hydrogen approach, encouraging a range of solution so long as they meet the UK’s Low Carbon Hydrogen Standard.

However, it stressed that for other technologies to make a significant contribution in the 2030s “we need to start developing them now”.

The production roadmap comes in response to recommendations made by chair of net zero review, Chris Skidmore, in an independent report published in January. Its recommendations included publishing, by the end of the year, an “ambitious and pragmatic” ten-year delivery roadmap for scaling up hydrogen production, including clear indication of how much capacity it hopes to procure though each future allocation round.

A warm welcome for funding, but money isn’t enough

Clare Jackson, CEO of the trade association Hydrogen UK, said HAR1 and the roadmap were

“important steps forward for the UK’s hydrogen economy”.

She said: “The hydrogen industry welcomes today’s suite of announcements, including the results of HAR1 negotiations that provide crucial support to first mover UK hydrogen projects, and will help kickstart domestic production.”

Ruth Herbert, CEO of the Carbon Capture and Storage Association, also welcomed the announcement.

“These are crucial next steps in the journey towards establishing the UK as a world-leading hydrogen economy, in which carbon capture, utilisation, and storage clusters will play an important part,” said Herbert. “We will continue to work closely with government on the design of the business models and further industry developments.”

Meanwhile, Paul Willacy, managing director of waste-to-hydrogen firm Compact Syngas Solutions, said that while the hydrogen investment was a

“massive step in the right direction” the UK needs the correct infrastructure to support supply.

He said: “Large-scale production projects are at risk of becoming white elephants if they aren’t linked to where the hydrogen is needed, and national infrastructure is still ten years behind where it needs to be. The issues caused by a lack of hydrogen infrastructure could be solved by producing and delivering hydrogen gas at a local level.

“Smaller production facilities dotted around the country would negate the need for costly pipelines and should be part of the government’s plans for the coming years.”

Hydrogen blending

The UK government also announced a decision to support hydrogen blending in certain scenarios. Currently, less than 1% of gas in distribution networks is hydrogen. Under proposals, hydrogen could be blended with other gases in the network as a reserve offtaker, reducing costs in the hydrogen sector by helping producers, and supporting the wider energy system.

The UK notes that though blending could help the UK realise its net zero ambitions, it would be limited and temporary as the country moves away from natural gas.