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4 recent updates shaping the UK’s hydrogen economy

We unpack governmental announcements made during Winter 2023-2024 that impact the development of the UK’s hydrogen economy.

The UK Hydrogen Strategy was published back in August 2021, and significant progress has been made to turn these ambitions into action. The Department for Energy Security and Net Zero (DESNZ) has recently provided a number of updates on their commitments to support the development of the UK’s hydrogen economy. 

Rt Hon Claire Coutinho MP, Secretary of State for Energy Security and Net Zero, said: “This Hydrogen Strategy Delivery Update, together with the full suite of hydrogen announcements and policies published today, demonstrates our resolve to build a world-class hydrogen sector – one that will make us more energy secure, more competitive economically, and on course to become a net zero nation by 2050.”. 

Dr. Mariachiara Zennaro, Regulatory Affairs Manager at Centrica, explores four hydrogen updates made by the Government during Winter 2023-2024 in more detail.

Up to
hydrogen ambition by 2030, up to 6 GW from electrolytic hydrogen
Up to
of UK’s energy consumption could be hydrogen by 2050
Through to 2037
of potential UK hydrogen projects have been identified

Update #1 - Steps announced towards hydrogen blending

The Government has taken a strategic policy decision to support blending up to 20% hydrogen by volume into GB gas distribution networks. Current evidence suggests it will deliver economic and strategic benefits. Trials are being undertaken to understand the feasibility and safety implications of the plan, before a final decision will be made on whether to enable blending to begin. 

This is a positive and important key step to kick start the hydrogen economy, since it could help to bring down hydrogen production costs and de-risk hydrogen production. Government has also committed to provide an update on timings for a decision on transmission-level blending in 2024. 

Update #2 – First round of funding allocated for green hydrogen projects

The Government has announced the names of 11 electrolytic (green) hydrogen projects that are being awarded funding under the Hydrogen Production Business Model. These projects represent the largest number of commercial-scale green hydrogen production projects announced at once anywhere in Europe. It equates to 125MW of production capacity. 

This is the first round of funding that’s being allocated, and applications for the second round of funding are now in progress. The Government hopes to support up to 875MW of hydrogen projects through this second round of funding. Third and fourth rounds of funding allocation are expected to launch in 2025 and 2026. DESNZ plan to run annual allocation rounds for electrolytic projects, and potentially alternative technologies, between 2025-2030. This funding represents a significant opportunity to unlock decentralised green hydrogen production in the UK.

Update #3 – Consultation explores using hydrogen to generate power 

The Government opened a new consultation to get feedback on the support mechanisms that are required to underpin the use of hydrogen to generate power (H2P) – for example, exploring whether H2P could compete in the Capacity Market. Government is considering providing a bespoke 

support mechanism, but only for more CAPEX-intensive H2P plants, such as combined cycle hydrogen power plants. Less capital-intensive plants, such as hydrogen peakers, could compete in the Capacity Market. The consultation closed at the end of February 2024, and analysis of the feedback is now taking place. The response to this consultation is expected to be published in the second quarter of 2024. 

Governmental updates cemented their belief that hydrogen will play an important role in helping to decarbonise the UK power sector. They confirmed that having hydrogen available in the power system could achieve lower emissions at a lower cost than scenarios without hydrogen could deliver. This includes using hydrogen as a fuel for Combined Heat and Power (CHP) units, as well as for peaking plants.

Last year, the Government also consulted on whether all new or fully refurbished combustion power plants should be required to meet decarbonisation readiness standards from 1 July 2024. Currently, only plants that are >300MW have to do this. 

This would mean that new plants that are put into operation, or refurbishing plants that are put back into operation, after 1 July 2024 would have to pass a number of tests to show they are either “Hydrogen Conversion Ready” or “Carbon Capture Ready”. The Government is expected to publish a response to this consultation soon.

Update #4 – Progress continues on funding for new hydrogen storage facilities

A consultation was recently completed to help determine the criteria that hydrogen storage facilities need to meet in order to benefit from funding through the Hydrogen Storage Business Model. This funding is crucial to the development of new hydrogen storage facilities and clusters, and will ultimately help to connect more organisations to a hydrogen fuel supply.

In Q3 2024, the Government plan to launch the first funding round to support up to two geological hydrogen storage projects. Projects will be selected in 2025 and will need to be commissioned between 2028 and 2032. They’re also considering introducing funding to advance the technological readiness of hydrogen storage technologies that don’t meet the minimum criteria. 

Moving towards a hydrogen-fueled future

In the recently updated Hydrogen Net Zero Investment Roadmap, the Government confirmed they believe there is potential for the UK to develop over 17GW of electrolytic hydrogen production, and nearly 10GW CCUS-enabled production potential, by 2030. 

The foreword from the Energy Secretary, Claire Coutinho, stated: “We are now entering a period of unprecedented growth for the UK hydrogen economy. With the largest number of commercial scale electrolytic hydrogen production projects announced at once anywhere in Europe, the UK is a world leading place to invest in hydrogen”.

If you’d like to have a conversation about what a hydrogen-fueled future might look like for your organisation, get in touch with the team from Centrica Business Solutions today.

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