UK’s Hydrogen Allocation funding: Round 2

Hydrogen Sector 02.02.24
Written by: HYCAP

The UK has initiated the second round of the Hydrogen Allocation Round (HAR) funding program, aiming for 875 MW allocation to projects operational between 2026 and 2029.

The funding, part of the Hydrogen Production Business Model (HPBM), uses a Contracts for Difference (CfD) subsidy approach. The Department for Energy Security and Net Zero plans annual HAR programs,

with HAR3 and HAR4, totalling 1.5 GW, slated for launch after 2025 to expedite 2030 hydrogen production targets.

In July 2022, the UK government launched the first Hydrogen Allocation Round (HAR1), a significant milestone in Europe, announcing 11 successful projects, with a total capacity of 125 MW. Among them is Hygen Energy‘s Bradford Hydrogen Production Facility, projected to be the highest MW producer on the list. Hygen’s pioneering project is positioned to contribute to job creation and industry decarbonisation, alongside the nation’s Net Zero objectives.

HAR1 represented a substantial investment opportunity, with over £2 billion in revenue support from the Hydrogen Production Business Model and £90 million from the Net Zero Hydrogen Fund allocated to support construction. The first HAR1 projects are expected to be operational from 2025, providing certainty for hydrogen developers, investors, and supply chain companies committed to the UK.

The projects, spanning 8 regions in England, Scotland, and Wales, are set to deliver various benefits. They include an upfront private capital investment of £413 million between 2024-2026, generating approximately 760 direct jobs during construction and operation.

Additional funds will be allocated to offtakers, supporting their transition to hydrogen and enhancing long-term viability.

These initiatives significantly contribute to energy security by aiding users in shifting from imported fuels to domestically produced hydrogen. This in turn fuels regional economic growth and also propels the low carbon hydrogen economy in the UK, aligning

with the 2025 goal of achieving up to 1 GW of electrolytic hydrogen production capacity. The government’s ambition remains to deploy up to 10 GW of low carbon hydrogen production capacity by 2030, potentially unlocking £11 billion in private investment and supporting over 12,000 jobs.

Launched in December 2023, Round 2 allocates 875 MW for projects operational between 2026 and 2029. Projects participating in HAR2 now have the chance to secure support through the Hydrogen Production Business Model (HPBM), leveraging a Contracts for Difference (CfD) subsidy.

HAR2 marks an ideal opportunity for government and private entities to align, expediting the growth of the UK’s hydrogen economy, job creation and the crucial decarbonisation of industries.

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