UK hydrogen funding round leaves investors waiting

Many private-sector hydrogen investors may turn their attention away from the UK after the government this week decided to fund only a proportion of the viable projects that had been proposed, industry participants have said.

The UK will provide subsidies for two newbuilds and one retrofit blue hydrogen project. But it decided not to fund plants proposed by Norway's state-controlled Equinor and UK-based Kellas Midstream in this round. And the government has yet to confirm which UK region will be next to get carbon capture and storage (CCS) facilities to enable blue hydrogen plants.

The government's decision to fund 250MW of electrolytic projects means around 40pc of the shortlisted 408MW capacity will not get funding in this round. The government's 20-project shortlist had already snubbed around half the 41 projects that applied.

"A lot of very good, investable projects have gone unfunded… at a time of such high international competitiveness," said industry body Hydrogen UK's chief executive Clare Jackson. "It's a risk that you just cannot afford to take."

German firm Siemens Energy's head of market and government affairs for the UK and Ireland, Matthew Knight, agreed.

"Developers of some very credible hydrogen projects who have not made the cut now need to reconsider their options," he said. "The global race for hydrogen is well underway as the UK is tying its shoelaces."

Knight said the government is moving too slowly.

"The announced shortlist of 20 green hydrogen projects only signals the start of discussions with developers," he said. "Award of contracts has been put back a further six months, to the end of 2023."

The pace means the UK will be starting production from hydrogen projects in 2025 at the earliest, with the average size of the shortlisted projects around 20MW. Some European countries could by then host single hydrogen projects that are 10 times larger. These include Shell's Hydrogen Holland plant in the Netherlands, for which a FID has been taken, and German utility RWE's Lingen electrolyser site, which are both scheduled to reach 200MW electrolyser capacity by 2025.

By Aidan Lea