Major Boost For Hydrogen As UK Unlocks New Investment And Jobs

14th December 2023

Eleven new production projects helping to place UK at forefront of hydrogen industry and bring progress towards net zero ambitions.

Eleven new production projects will invest around £400 million up front over the next 3 years, growing the UK's green economy.

more than 700 jobs to be created, representing the largest number of commercial scale green hydrogen production projects announced at once anywhere in Europe.

new certainty for industry as government sets out hydrogen ambitions, including future production, transport and storage rounds.

Over 700 jobs will be created across the UK in a world-leading hydrogen industry from the South West of England to the Highlands of Scotland, backed by £2 billion in government funding over the next 15 years.

Energy Security Secretary Claire Coutinho today (Thursday 14 December) announced backing for 11 major projects to produce green hydrogen - through a process known as electrolysis - and confirmed suppliers will receive a guaranteed price from the government for the clean energy they supply.

This represents the largest number of commercial scale green hydrogen production projects announced at once anywhere in Europe, helping to place the country at the forefront of this emerging industry. Unlike blue hydrogen, which is formed using fossil fuels and capturing the carbon emissions, green hydrogen is made by using renewable energy to split water - helping provide cleaner fuel for energy intensive industries and transport.

In return for this government support, the successful projects will invest over £400 million in the next 3 years, generating more than 700 jobs in local communities across the UK and delivering 125MW of new hydrogen for businesses including:

Sofidel in South Wales, who will replace 50% of their current gas boiler consumption with hydrogen at their Port Talbot paper mill
InchDairnie Distillery in Scotland, who plan to run a boiler on 100% hydrogen for use in their distilling process
PD Ports in Teesside, who will use hydrogen to replace diesel in their vehicle fleet, decarbonising port operations from 2026
Energy Security Secretary Claire Coutinho said:

Hydrogen presents a massive economic opportunity for the UK, unlocking over 12,000 jobs and up to £11 billion of investment by 2030.

Today's announcement represents the largest number of commercial scale green hydrogen production projects announced at once anywhere in Europe.

These 11 major new hydrogen projects across the UK will create over 700 jobs and deliver new opportunities from Plymouth in England to Cromarty in Scotland.

Minister for Energy Efficiency and Green Finance Lord Callanan 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.

And we're not stopping there with a new, second round of funding now available for producers to apply for, so they can develop the next round of projects and build on this success.

Today’s funding 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 10GW low carbon production capacity by 2030.

Ministers have also today opened a new second round of funding that companies can apply for to support their projects and published a production roadmap, which sets out the government’s plan for future allocation rounds in 2025 and 2026. This includes ambitious plans to boost hydrogen capacity up to 1.5GW across these rounds, and award funding to projects to help deliver up to 4GW of CCUS-enabled, or blue, hydrogen and 6GW of green hydrogen by 2030 - giving businesses the confidence they need to invest in the UK.

Ministers have also announced their decision to support hydrogen blending in certain scenarios – subject to an assessment of safety evidence and final agreement.

Currently, less than 1% of the gas in distribution networks is hydrogen. Under proposals, hydrogen could be blended with other gases in the network as an offtaker of last resort, working to reduce costs in the hydrogen sector by helping producers, and to support the wider energy system.

Hydrogen blending may help achieve the UK’s net zero ambitions, but would have a limited and temporary role as the UK moves away from the use of natural gas.

Ministers have decided not to proceed with a hydrogen trial in Redcar, as the main source of hydrogen will not be available. The government recognises the potential role of hydrogen in home heating and will assess evidence from the neighbourhood trial in Fife, as well as similar schemes across Europe, to decide in 2026 whether and how hydrogen could help households in the journey to net zero.

Applies to England, Scotland and Wales
Following the launch of the first hydrogen allocation round (HAR1) in July 2022, we have selected the successful projects to be offered contracts. We are pleased to announce 11 successful projects, totalling 125MW capacity.

HAR1 puts the UK in a leading position internationally: this represents the largest number of commercial scale green hydrogen production projects announced at once anywhere in Europe. This round will provide over £2 billion of revenue support from the Hydrogen Production Business Model, which will start to be paid once projects become operational. Over £90 million from the Net Zero Hydrogen Fund has been allocated to support the construction of these projects.

We have conducted a robust allocation process to ensure only deliverable projects that represent value for money are awarded contracts. The 11 projects have been agreed at a weighted average [footnote 1] strike price of £241/MWh (£175/MWh in 2012 prices). This compares well to the strike prices of other nascent technologies such as floating offshore wind and tidal stream.

Government delivered HAR1 to time, and we expect that first projects will become operational from 2025. Combined with our commitments to further Hydrogen Allocation Rounds, this gives hydrogen developers, investors and supply chain companies the certainty they need to commit to the UK.

Government has engaged extensively with industry and recognises what it takes to make first-of-a-kind hydrogen projects commercially viable. The 11 successful projects demonstrate the UK hydrogen sector and commercial framework is highly investible and attractive for both equity and debt investors. The projects cover 8 regions across England, Scotland and Wales and will provide a range of benefits, including:

£413 million of private capital being invested by the projects upfront between 2024-2026, with around 760 direct jobs created during construction and operation.

£ millions more to be spent across a wide range of offtakers (users of the hydrogen, including hard to decarbonise industrial processes and heavy transport facilities) to convert their operations to hydrogen and improve their long-term viability.

enhancing energy security, given these projects will support users to switch from imported fuels such as natural gas and diesel to domestically produced hydrogen.

kickstarting the low carbon hydrogen economy across the UK, helping meet the 2025 ambition of up to 1GW of electrolytic hydrogen production capacity in operation or construction.

advancing government’s reaffirmed ambition to deploy up to 10GW of low carbon hydrogen production capacity by 2030, with at least half from electrolytic hydrogen production capacity, subject to value for money and affordability. This could unlock up to £11 billion of private investment and support more than 12,000 jobs by 2030
We remain committed to our ambition of having up to 1GW of electrolytic hydrogen in construction or operation by the end of 2025. As such, we have also launched the second hydrogen allocation round (HAR2) with an aim to support up to 875MW capacity, subject to affordability, value for money and quality of projects.

Of the 17 projects that entered final negotiations, 2 projects withdrew and 15 projects, totalling 243MW of capacity, submitted Best and Final Offers. Of these, 4 were not successful.

We encourage all projects who have not been successful in HAR1 to consider applying in HAR2 with more competitive proposals - please see the HAR2 application guidance for further details.

List of successful HAR1 projects
Project Name Lead Developer Location Capacity (MW)
Barrow Green Hydrogen Carlton Power North West 21.0
Bradford Low Carbon Hydrogen Hygen Yorkshire 24.5
Cromarty Hydrogen Scottish Power and Storegga Scotland 10.6
Green Hydrogen 3 HYRO South East 10.6
HyBont Marubeni Europower Wales 5.2
HyMarnham JG Pears and GeoPura East Midlands 9.3
Langage Green Hydrogen Carlton Power South West 7.0
Tees Green Hydrogen EDF Renewables Hydrogen North East 5.2
Trafford Green Hydrogen Carlton Power North West 10.5
West Wales Hydrogen H2 Energy and Trafigura Wales 14.2
Whitelee Green Hydrogen Scottish Power Scotland 7.1