The UK arm of multinational bank HSBC has finalised its first deal to fund a green hydrogen project developer. It has agreed a “multi-million pound funding deal” to support Oxford-based project developer Hygen in the expansion of capacity at its Birmingham production site and other projects across the UK.

For a lender, Hygen looks like a decent bet. It aims to scale up to 500MW of low-carbon hydrogen production capacity in the UK. Crucially, it is part of HydraB, a holding company comprising transport-focused firms including Ryze, a hydrogen distributor, and Wrightbus, the UK’s leading manufacturer of hydrogen and battery-electric buses. This gives Hygen a route to market. The company says it supplies green hydrogen to major customers such as coach operator National Express and digger maker JCB.

“The green hydrogen industry requires better access to both equity and debt funding to truly take off” Shah, HSBC UK

The same cannot be said for many of the green hydrogen projects at various stages of development in the UK, which goes some way to explaining why HSBC has waited until now to dip its toes into the sector—and why many of its peers remain on the sidelines.

Well documented production cost pressures and resulting difficulties securing offtake agreements continue to test the bankability of many projects, with subsidies struggling to bridge the gap to the prices that consumers would be willing to pay. Securing the funding from banks and other potential financiers needed to bring projects to FID remains challenging for many projects.

 “The green hydrogen industry is still in its early stages of development and requires better access to both equity and debt funding to truly take off,” said Akhil Shah, relationship director at HSBC UK. “This deal underlines HSBC UK’s commitment to this emerging sector, supporting the development of new technologies essential for the transition to a net-zero economy.”

If we regard this decade as the first rapid scale-up phase, with substantial 2030 capacity targets set by the UK and many other governments, then 2025 actually looks quite late for HSBC to be joining the UK’s green hydrogen push.

After all, there is no shortage of projects in the UK and around the world to consider. Gulf Energy Information’s Global Energy Infrastructure is tracking 109 green hydrogen projects in the UK alone. Also, the UK’s subsidy scheme, which is based on contracts for difference, is starting to kick in and is regarded as being among the more attractive support mechanisms on offer globally.

Cost gap

A new paper from Germany’s Potsdam Institute for Climate Impact Research highlights the scale of the cost challenge faced by green hydrogen. Without a carbon price—which inflates the cost of fossil fuels—the cost gap between green hydrogen and natural gas was $150/MWh in 2024, the paper says. This implies that green hydrogen is initially more than seven times as expensive as natural gas.  

The cost gap between green hydrogen and grey hydrogen was only slightly lower, at $121/MWh in 2024. “As green hydrogen costs decrease, the cost gap gradually reduces, but typically prevails also into the long term,” the paper said.

Recent trends are not encouraging. Cost estimates for electrolysers have recently surged due to increasing equipment and financial costs. This has further increased the pressure on governments to subsidise the sector. “Bridging the substantial cost gap and reducing investment risks requires hydrogen-specific support policies and regulation, even in countries with ambitious carbon pricing,” the Potsdam Institute paper said. It pointed to an “implementation gap”, with only 7% of projects announced up until 2023 materialising.

Policymakers should prepare to subsidise green hydrogen for the long term. Realising all of the green hydrogen projects announced around the world, stripping out the impact of carbon pricing,  would require subsidies of about $1.3t, far exceeding announced subsidies, the paper said.

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Author: Stuart Penson