UK selects preferred blue, green H2 projects

The UK has chosen its first two blue hydrogen projects for subsidies and shortlisted a first wave of planned green hydrogen sites for support.

The government made the announcements today alongside the release of its revised energy strategy.

The two chosen blue hydrogen sites, BP's 500MW Teesside plant and Vertex Hydrogen's 350MW facility at Stanlow, will now enter negotiations with the government for subsidy support under the planned 'hydrogen business model'. The sites should be able to take final investment decisions (FID) when they have agreements with government and after the connected carbon capture facilities are confirmed.

The northwest cluster HyNet, of which Vertex Hydrogen's site is to be a part, is on course for a FID around the first quarter of 2024. The east coast cluster, which BP's facility could link to, is likely to follow later that year. This means the UK's carbon-capture enabled hydrogen plants could be some of the first in the world to come online.

Westminster today also released updated legislation that will underpin the subsidy scheme for the projects and is consulting on this until May. It builds on a preliminary version released in December.

Blue hydrogen projects proposed by Norwegian state-controlled Equinor and UK firm Kellas Midstream had also been shortlisted as as part of the "cluster sequencing phase 2" allocation round for carbon capture and utilisation projects, but did not get the nod. That said, they may get funding eventually, as the government intends to launch a process later in the year to support more projects at HyNet and the east coast cluster.

Green hydrogen projects

On the electrolytic hydrogen side, the government has shortlisted 20 projects for funding as part of its first "hydrogen allocation round" that opened last year.

The projects have a combined capacity of 408MW but the government said it plans to only award contracts totalling 250MW for the first round. It will now perform due diligence and open negotiations with the projects during the second and third quarters. London aims to award contracts to the successful projects before the end of 2023, to enable the start of operations in 2025.

Much like in the process for carbon capture-enabled projects, not all those shortlisted will get contracts and the unsuccessful proposals may get funding in future rounds. The government plans to launch a second allocation round in the fourth quarter of this year and aims to award contracts for a total of 750MW of capacity in early 2025.

Projects in the hydrogen allocation rounds can apply for revenue support only, or for a combination of revenue support and capital cost support. The government will fund a maximum of 20pc of capital costs for projects, it said.

The government also today distributed grants for £37.9mn ($47mn) divided across 15 blue and green hydrogen projects, which will help fund engineering studies and construction costs.

By Aidan Lea