FT: Britain's emerging green hydrogen sector faces a defining moment

The United Kingdom is seeking to establish itself as a global leader in low-carbon hydrogen production, which it wants to use to decarbonise industry, transport and power generation. Development has stalled, particularly in the production of so-called green hydrogen, and the government has therefore decided to support it with state aid. The first projects, with a combined capacity of up to 250 MW and expected to come online after 2025, could receive support in the coming weeks. The Financial Times (FT) reported.

The FT reported that the United Kingdom had managed to bring only two smaller green hydrogen production facilities online this year, bringing their total operating capacity to around 5 MW. This represents 0.1% of the 5 GW target set by the British government for 2030.

The 5 GW of electrolysers for green hydrogen production is to be complemented by a further 5 GW of so-called blue hydrogen production capacity by 2030. Blue hydrogen is produced from fossil fuels using facilities that capture and store CO2 emissions.

A defining moment

According to the FT, the British government is preparing a form of state aid, details of which have yet to be specified, to kick-start the construction of green hydrogen production facilities. The support is expected to cover up to 250 MW of electrolysers in the coming weeks.

"Each contract will provide operators with a guaranteed revenue stream for their project. Further rounds of support are expected to follow, helping to put the United Kingdom on track to meet its overall target of 10 GW of low-emission hydrogen production by the end of this decade," the FT reported.

RenewableUK analyst Laurie Heyworth said the planned state aid was a "defining moment" for the entire emerging industry.

The preparatory process, which began last year, identified 17 projects with a combined capacity of 262 MW, being developed by companies including BP, SSE and EDF.

"I think it is crucial that these projects succeed, reach final investment decisions and come online over the next few years," Heyworth added.

Several projects put on hold

The fact that building an entirely new industry will not be easy is illustrated by the three projects that have already withdrawn from the process since negotiations on the terms of support began. They included Gigastack, the largest project in development, which was planned to have a capacity of 100 MW.

Another project that is now unlikely to feature in the first round of supported projects is a planned facility being developed by British petrochemicals company Ineos. The company has complained about the government's unrealistic requirement that the facility be operational by mid-2026.

"We are in a period of significant cost increases, so companies are carefully analysing every investment decision," said Molly Iliffe, head of hydrogen at British consultancy Baringa.

The EU and US have already introduced support

The FT noted that the European Union and the United States have already introduced support for green hydrogen production facilities.

At the end of November, the EU launched its first hydrogen auction through the newly established European Hydrogen Bank, in which successful projects are to share €800 million.

In October, the United States announced $7 billion in support for the construction of seven regional clean hydrogen hubs, with a further billion dollars earmarked for developing demand for the fuel.

If the United Kingdom genuinely wants to pursue a leading role in this sector, critics say it will have to do significantly more.