UK reveals winners of first hydrogen allocation round

UK government has concluded the first hydrogen allocation round (HAR1) and selected eleven projects, totaling 125 MW capacity, to receive over £2 billion (around $2.5 billion) of revenue support from the Hydrogen Production Business Model.

Launched in July 2022, HAR1 represents the largest number of commercial-scale green hydrogen production projects announced at once anywhere in Europe, the UK’s Department for Energy Security and Net Zero (DESNZ) said.

This round will provide over £2 billion of revenue support from the Hydrogen Production Business Model, which will start to be paid once projects become operational. Over £90 million from the Net Zero Hydrogen Fund has been allocated to support the construction of these projects.

According to DESNZ, a robust allocation process was conducted to ensure only deliverable projects that represent value for money are awarded contracts. The eleven projects have been agreed at a weighted average strike price of £241/MWh, which compares well to the strike prices of other nascent technologies such as floating offshore wind and tidal stream.

The government expects the first projects to become operational from 2025. The projects cover eight regions across England, Scotland, and Wales and are expected to provide a range of benefits, including:

• £413 million of private capital being invested by the projects upfront between 2024-2026, with around 760 direct jobs created during construction and operation;
• £ millions more to be spent across a wide range of off-takers (users of the hydrogen, including hard-to-decarbonize industrial processes and heavy transport facilities) to convert their operations to hydrogen and improve their long-term viability;
• enhancing energy security;
• kickstarting the low carbon hydrogen economy across the UK, helping meet the 2025 ambition of up to 1 GW of electrolytic hydrogen production capacity in operation or construction; and
• advancing the government’s ambition to deploy up to 10 GW of low carbon hydrogen production capacity by 2030, with at least half from electrolytic hydrogen production capacity, subject to value for money and affordability.

Of the seventeen projects that entered final negotiations, two projects withdrew and fifteen projects, totaling 243 MW of capacity, submitted Best and Final Offers. Of these, four were not successful.

The UK government has also launched the second hydrogen allocation round (HAR2) with an aim to support up to 875 MW capacity, subject to affordability, value for money, and quality of projects.

Expression of Interest can be submitted by February 5, 2024. The application submission window will open on February 6, 2024, and applications, with all the required supporting evidence, will be accepted by April 19, 2024.