UK prepares ‘plethora of announcements’ to counter U.S., EU hydrogen support
The government is preparing a swathe of new measures to support the UK’s hydrogen sector as it seeks to respond to aggressive subsidies from the U.S. and the EU.
The administration of Prime Minister Rishi Sunak is readying a “plethora of announcements” on hydrogen, Graham Stuart, the outgoing minister with responsibility for the UK’s hydrogen strategy told parliament last week.
“Hydrogen is an important area in which we are a world leader; it is my intention to ensure that we remain in pole position,” he said in response to a question from Conservative MP Alexander Stafford.
“We will also be making announcements in the next few weeks about hydrogen, carbon capture and the future there, and I have already committed in the House to accelerating our approach to that,” Stuart said in response to a separate question.
The timing is important because some of the UK’s competitors for hydrogen investment, notably the U.S. and the EU, have been ramping up their support for the clean fuel in recent months.
While the UK was the first country in the world to announce a subsidy scheme for clean hydrogen production in the first half of 2022, it has since been overshadowed by the Biden administration’s Inflation Reduction Act, which offers subsidies of as much as $3 per kg for the cleanest hydrogen.
The administration of Prime Minister Rishi Sunak is readying a “plethora of announcements” on hydrogen, Graham Stuart, the outgoing minister with responsibility for the UK’s hydrogen strategy told parliament last week.
As well as $369 billion of subsidies and incentives for electric vehicles, carbon capture, renewable energy and clean hydrogen, the IRA also contain strict made-in-America rules that mean imported hydrogen doesn’t benefit from the same incentives.
Goldman Sachs described the law as a “turning point” for the economics of hydrogen that makes green hydrogen (produced by splitting water with electrolysers powered by renewable energy) profitable at scale.
The EU has been no slouch itself when it comes to hydrogen support. It launched REPowerEU in May of last year as a strategy to wean itself off Russian hydrocarbons and includes measures to increase hydrogen production capacity, develop partnerships with other producing nations to build hydrogen corridors in the Mediterranean and the North Sea.
The EU has since announced further hydrogen initiatives including €10.6 billion for hydrogen-related projects through Hy2Use and Hy2Tech and at least €3 billion for the so-called European Hydrogen Bank, which will become a market-maker for hydrogen by guaranteeing purchases to create certainty of demand.
The government is preparing a swathe of new measures to support the UK’s hydrogen sector as it seeks to respond to aggressive subsidies from the U.S. and the EU.
In early February, the EU proposed a “Green Deal Industrial Plan” specifically designed to counter the IRA. It includes plans to loosen the regulatory environment around green projects, reducing red tape and enabling the fast-tracking of projects, such as clean hydrogen. It also proposes weakening state aid rules in the short-term to allow governments to support companies more freely, while preparing a European Sovereignty Fund in the medium term, although there has been some pushback against this because of the risk to the bloc’s level playing field.
The UK was the first to the punch when it came to designing support for clean hydrogen. The UK opened the application window for the Hydrogen Business Model in July 2022 along with £240 million Net Zero Hydrogen Fund, and aims to support at least 250 MW in the first allocation round. A shortlist of successful projects is expected to be announced in early 2023, although an exact date is yet to be provided.
The UK scheme works in a similar manner to renewable energy auctions in that a strike price is negotiated with the government on a project-by-project basis, enabling it to recover the cost of production and make a return on investment.
While that potentially represents quite a generous incentive, it caps profits in a way that the IRA does not. So how should the UK government respond and what would we like to see in the “plethora” of forthcoming announcements?
One key benefit of the UK having left the EU is that it is no longer beholden to the bloc’s state-aid rules, meaning that the government’s hands are not tied when it comes to supporting domestic industry. Obviously, there is not an unlimited pot of money to draw upon but increased direct support for the nation’s hydrogen industry would pay dividends for years to come.
The UK has been a leader in the emerging hydrogen economy. Pictured: JCB’s hydrogen refuelling truck; the construction manufacturing giant has also developed an award-winning hydrogen combustion engine.
To see an appropriate loosening of planning rules for both green hydrogen projects and the renewable-energy projects that support them would of course encourage efforts. Faster speed to market will support hydrogen investment in this country, supporting jobs and helping us achieve our net zero goals. Investment in infrastructure that supports both the renewable energy industry with a more robust and responsive grid and a pipeline network to transport hydrogen to end users would be money well spent.
Support for the transformation of industries, such as steelmaking that require massive investment in hydrogen to decarbonise, is also essential to the future of the UK economy.
The UK has been a leader in the emerging hydrogen economy. As well as the Hydrogen Business Model, the £26 million Industrial Hydrogen Accelerator Programme run by the Department for Business and Industrial Strategy has awarded millions of pounds already to projects aiming to decarbonise industries including asphalt, cement, steel and ceramics. £25 million of funding for technologies for producing hydrogen from biomass and waste was unveiled last year, while a £20 million competition in the Tees Valley to explore how hydrogen can be used to reduce emissions in the transport sector was launched in October 2022.
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