The UK was a first mover in announcing major funding for low-carbon hydrogen, but the initial scope of its support scheme means it is set to leave a pipeline of credible projects unfunded, adding to the risk that private investment will move elsewhere, according to Clare Jackson, CEO of industry association Hydrogen UK.

The government’s first tranche of funding under its £100mn ($120mn) hydrogen business model scheme will cover 250MW of electrolytic hydrogen projects, with a shortlist of qualifying projects expected imminently. But Jackson says 250MW is not enough, given the number of projects in the pipeline. She estimates there is £1.1bn of private investment “ready to go” for early-stage hydrogen projects, but that this could disappear to the US and EU owing to more generous policy support in those regions.

“Projects that would help us meet that ambition will go unfunded” Jackson, Hydrogen UK

“We are worried that the government will leave great projects unfunded. There is a huge volume of credible projects in the pipeline,” Jackson says. “The 250MW capacity was set out when we had a 5GW target rather than a 10GW target (by 2030). Projects that would help us meet that ambition will go unfunded and there is no guarantee they will still be there when the second round of funding comes along.”

UK projects are already being deprioritised by some companies, Jackson says. “We know of an industrial user, looking to decarbonise its operations globally, that originally had a UK [hydrogen] project scheduled to come online first that will now come online sixth.”

“Companies with operations in the US will have to justify at the board level that investment in the UK makes sense,” she says. The US’ Inflation Reduction Act includes generous tax credits for hydrogen projects, making that market highly attractive for investors.

However, Jackson notes that the pipeline in the UK is more mature than elsewhere. “There are more investable projects here, the technology is more thought through, offtake is already lined up—the UK is still a great place to do hydrogen.”

A decision on a financing model for storage and transportation infrastructure is scheduled for 2025, although Jackson urges an acceleration of the process owing to the long lead times of such projects.

Missing the boat

While Jackson notes that “the UK will have to use hydrogen”, she says global hydrogen trade and potential exports or imports of the fuel are still a longer-term proposition. “At the moment, we are more interested in getting the supply chains and technology set up—exporting our technology before we start to think about exporting the actual molecules.”

“We have missed the boat on so many other technologies,” she adds, noting that the UK is a global leader in the deployment of renewables such as offshore wind, but that much of the value chain is sited outside the country.

“China is investing heavily in electrolyser technology. We still have good technology in electrolysers and other hydrogen production methods here, but there is a danger that if we do not support our industry, China and other nations will make it very attractive to build manufacturing capacity there.”

Heating up

A decision on whether hydrogen will be included in the government’s heat decarbonisation policy will be made in 2026. Even within the sector, the use of hydrogen in domestic heating has been the subject of controversy, with critics pointing towards the inefficient use of renewable electricity compared with heat pumps and proponents arguing that a hydrogen boiler is an easier switch for some households to make.

Hydrogen’s potential role in heating has recently been criticised by the House of Lords’ Environment and Climate Change Committee. In an investigation of the take-up of the Boiler Upgrade Scheme—a £5,000–6,000 grant towards replacing household boilers with heat pumps or biomass-fired boilers launched last year—the committee found that public awareness of this support and low-carbon heating options in general was very limited.

“Hydrogen is not a serious option for home heating in the short-to-medium term, and its use is expected to be limited in the long-term, but the high level of misinformation and confusion that exists around hydrogen—not helped by mixed messages from government such as the hydrogen-ready boiler consultation—is undermining take-up of heat pumps,” committee chair Kate Parminter argues in a letter to the government.

---

Author: Polly Martin