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18 January 2024
Renewable Energy

UK Leads The Way in Supporting Large Number of Commercial-Scale Green Hydrogen Projects

In a critical step forward to transform the UK into a highly investable market for green hydrogen, the Government has awarded support to 11 green hydrogen projects in a world-first commercial-scale Hydrogen Allocation Round, securing 125 megawatts (MW) of capacity. Ministers have also published a strategic roadmap which sets out the UK’s commitment to ramp up a low carbon hydrogen economy between now and 2035.

As a versatile energy source, green hydrogen remains a crucial piece of the UK’s energy security and net zero strategy. It can be used in parts of the electricity system which are hard to decarbonise, and can also be stored for whenever it is needed, providing flexibility to our power system and ensuring the UK can always meet its energy needs.

Acknowledging this, the Government has revised its target of 10 gigawatts (GW) of low carbon hydrogen by 2030 to better align with the escalating role anticipating for green hydrogen. 6GW of this target will now be supplied by green hydrogen generated from renewables (up from 5GW), while the remaining 4GW will be sourced from blue hydrogen.

In the first allocation round, the Department for Energy Security and Net Zero invited green hydrogen developers to submit their projects for assessment to determine which would be deliverable and offer good value for money. Although 4 were unsuccessful, and 2 pulled out, 11 projects ranging from 5.2MW to 24.5MW have be awarded contracts at a weighted average strike price of £241/MWh. The successful developers will now need to reach Final Investment Decision within the next six months to take up their contracts.

The remaining capacity from the first allocation round will be carried over to the newly-launched Hydrogen Allocation Round 2 (HAR2) to secure a further 875MW. The application window will run from now until April 2024, with results due to be published early 2025. HAR1 and HAR2 are aiming to deliver a total of 1GW of green hydrogen capacity (in construction or operation) by 2025.

Additionally, in a move advocated by RenewableUK, DESNZ has opted against competitive hydrogen auctions by 2025, adopting a more gradual approach instead. This means both HAR3 and HAR4 will be similar to previous rounds, but with an increasing focus on cost, with the latter including a bidding process rather than bilateral negotiations. Both these rounds will deliver up to 1.5GW of capacity in total. Further allocation rounds will take place on an annual basis, with the possibility of fully competitive auctions being introduced in Hydrogen Allocation Round 5 in 2027 at the earliest.

RenewableUK’s Senior Policy Analyst for Emerging Technologies Laurie Heyworth said:

“It’s great to see the UK leading the way on green hydrogen, with the largest number of commercial-scale projects announced at one time anywhere in Europe. This marks the beginning of the first major wave of larger-scale projects, enabling us to unlock £11bn in private investment by 2030 and to start building up UK-based supply chains.

“It comes at a time of acute international competition to develop innovative green technology, especially from the U.S. and Germany. The UK now has huge potential to become a world leader in green hydrogen with cutting-edge companies already operating successfully here, creating opportunities for us to export this technology worldwide.

“But to remain on track, we’ll need to see continuous improvements in future allocation rounds to ensure the deployment of much larger projects, which will catalyse cost reduction and enable us to deliver the UK’s world-leading hydrogen strategy in the 2030s”.

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