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Hydrogen Industry

Volume 742: debated on Thursday 14 December 2023

In pursuit of our hydrogen ambitions, today I am announcing the 11 electrolytic (or “green”) hydrogen projects that have been successful in the first hydrogen allocation round (HAR1). This announcement has been made alongside the launch of the second hydrogen allocation round (HAR2) and a number of important new policy updates across hydrogen production, transport, storage and use. Together, these announcements set out the steps that the Government are taking to deliver a world-leading hydrogen economy and support high-quality jobs and investment across the UK.

The announcement of the 11 successful HAR1 projects marks the UK as a global leader in hydrogen, representing the largest number of commercial scale electrolytic production projects announced at once anywhere in Europe. We are committing over £2 billion of support to these projects through 15-year contracts, in addition to £91 million in up-front capital co-funding, unlocking substantial investment from industry:

£413 million of private capital will be invested by the projects up front between 2024 and 2026;

Over 700 jobs will be created during construction; and

We anticipate millions to be spent by offtakers, which are those businesses committing to convert their operations to using hydrogen, and buying the hydrogen produced. These include major employers and household names in consumer goods, and businesses such as distilleries and heavy transport hauliers.

HAR1 was the first of our planned annual electrolytic allocation rounds for the hydrogen production business model. The successful projects, which will all be operational by 2026, located across 11 sites in England, Scotland and Wales, represent 125 MW of hydrogen production capacity.

Low-carbon hydrogen will be crucial for ensuring energy security and achieving net zero. In the process it could help to transform our industrial heartlands, unlocking over 12,000 jobs and up to £11 billion in private investment by 2030 across the UK. It will be needed to decarbonise vital UK industrial sectors and heavy transport, as well as supporting resilience and security for our power system.

In addition to announcing the winners of HAR1, I am delighted to have launched the second hydrogen allocation round—HAR2—today, through which we will aim to award contracts of up to 875 MW, subject to affordability and value for money. Together HAR1 and HAR2 aim to deliver our ambition of having up to 1 GW of new electrolytic hydrogen production capacity being in operation or construction by 2025.

Today we have also published a hydrogen production delivery road map, which sets out how we expect the UK hydrogen production landscape to evolve to 2035. This road map contains further details on our proposal for annual hydrogen allocation rounds from 2025 to 2030 and sets out our ambitions to allocate up to 1.5 GW across HARs 3 and 4, subject to affordability and value for money. This clarity on future allocation rounds is what industry has been calling for and will help to bring forward long-term investment into low-carbon hydrogen production projects in the UK.

Hydrogen transport and storage infrastructure will be essential to the development of the UK hydrogen economy, providing the link between production and demand. As such, today the Government have also published a hydrogen transport and storage networks pathway, which sets out the next steps in our vision for the strategic development of UK hydrogen transport and storage infrastructure. Alongside this, I am setting out our intentions for the first allocation rounds of the hydrogen transport and storage business models, including for these rounds to open in 2024 and to allocate support for up to two storage projects at scale and associated regional pipeline infrastructure. This is a major step forward in the delivery of the critical hydrogen infrastructure we will need and builds on the legislative powers created in the Energy Act 2023.

I am also announcing that following consultation, and based on current evidence, the Government see potential strategic and economic value in supporting the blending of up to 20% hydrogen by volume into the GB gas distribution networks, in certain circumstances. Blending has the potential to stimulate an early hydrogen market through de-risking hydrogen production projects and reducing costs at a project level, as an offtaker of last resort, and at a system level.

The “Powering Up Britain: Energy Security Plan” announced our intention to consult in 2023 on the need and potential design options for market intervention to support hydrogen to power. I can today announce that this consultation has been published and is open for responses. The consultation outlines our minded-to position on intervention design of a potential hydrogen-to-power business model, and proposals to enable hydrogen-to-power plants to compete in the capacity market as soon as practical.

The proposed hydrogen village trial in Redcar cannot go ahead as designed, as the main source of hydrogen supply will not be available. As such, the Government are not in a position to provide support for the trial. The Government still plan to take a decision in 2026 on whether, and if so how, hydrogen will contribute to heating decarbonisation. We will assess evidence from the neighbourhood trial in Fife, as well as similar schemes across Europe, to take this decision.

Since publication of the UK hydrogen strategy in August 2021, the Government have published regular updates to the market to deliver clarity on the direction of hydrogen policy across the value chain, so that the Government, industry and investors can work together most effectively to build a world-leading hydrogen economy. Our hydrogen strategy delivery update sets out Government policy and funding progress so far and updates the UK hydrogen economy road map for the next decade to provide a detailed timeline on the steps that the Government are taking to deliver its vision.