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15 Dec 2023

The UK has allocated 11 green hydrogen projects over £2bn of subsidies

Amy Power
The UK has allocated 11 green hydrogen projects over £2bn of subsidies

A recent announcement revealed that 11 green hydrogen projects, totalling 125MW, will receive $12 per kg for 15 years from the UK. The projects receiving the subsidies are based within England, Wales and Scotland.

The first Hydrogen Allocation Round (HAR1) will see the winning projects receive a strike price of £241/MWh, which will occur over a period of 15 years. This award is subject to the natural gas price, which the government mentioned under a Contracts for Difference-Style scheme during the allocations of these prizes. This clause may affect how much of the exact subsidy the companies are provided with. This MWh value, refers to the higher heating value of hydrogen, which is 39.4kWh/kg, the measurement for each MWh is 25.4kg of H2. This results in the winning companies each receiving an effective strike price of £9.49 per kg. These benefits will be awarded to the selected companies once their hydrogen projects start producing hydrogen. Although, on top of the prize, the Net Zero Hydrogen Fund, a separate company who is not directly linked to this prize, has already started to benefit these companies through providing them with £90m. This funding has been provided to aid the companies and projects with their construction processes. Altogether, a total of 17 projects entered the final negotiations for the HAR1. In the end, two withdrew from the negotiations and only four projects were rejected.

Some of the winning companies and projects included, Carlton Power who is running Barrow Green Hydrogen, Hygen who is running Bradford Low Carbon Hydrogen, Scottish Power and Storegga who is running Cromarty Hydrogen and HYRO (RES/Octopus) who is running Green Hydrogen 3. There are lots of other companies who have been lucky enough to receive the prize which the UK is providing.

After the news for HAR1 was released, an announcement for a second round, HAR2 was introduced by the Government. Dependant on “affordability and value for money” this round will be worth 875MW of green hydrogen. Along with this announcement, another one was made by the Government, talking about the ‘Hydrogen Production Delivery Roadmap’ which includes details about how HAR3 and HAR4 will both aim to provide a maximum of 750MW. These subsidies will be awarded in 2025 and 2026. There has also been the suggestion of plans for more rounds commencing in 2027, 2028 and 2029, but the sizes of these tenders is yet to be decided.

The aim behind these subsidies is to ‘help the UK “achieve our aim of up to 1GW of electrolytic hydrogen production projects to be in operation or construction by 2025”.’

The Department for Energy Security and Net Zero (DESNZ), commented, “We encourage all projects who have not been successful in HAR1 to consider applying in HAR2 with more competitive proposals.”

minister for energy efficiency and green finance, Lord Callanan, added, “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.”


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