The UK Government has released its latest update to the UK Hydrogen Strategy, first published in 2021. Our 2021 briefing Will the UK’s “colour-blind” hydrogen strategy accelerate the transition? gives an overview of the original published strategy.

The UK Hydrogen Strategy 2024 update (the 2024 Update) provides a roundup of progress to date and sets out a roadmap for the Government's plans for developing a robust hydrogen economy in the UK.

Progress to date

Funding Hydrogen Production

In February 2024, the Net Zero Hydrogen Fund (NZHF) allocated £240 million to support low-carbon hydrogen production under Round 2 of the NZHF Strands 1 and 2 competitions, focusing on the construction and operation of new low carbon hydrogen production facilities. In 2024, £21 million was directed to seven new production projects across the UK, following on from the £37.9 million allocated to 15 projects in Round 1 of NZHF Strands 1 and 2 in 2022. 

Hydrogen Allocation Rounds (HARs)

11 successful projects were announced under HAR1, totalling 125MW of capacity. Low Carbon Hydrogen Agreements (LCHAs) have been issued to three of these projects, enabling them to make final investment decisions and begin construction. LCHAs for the remaining projects are expected to be issued in early 2025, with the first project operational that same year.  

HAR2, which launched in December 2023, received 87 applications for over 2.8GW of capacity, with the outcome of this latest round still pending (expected early 2025).

See our briefing The UK's Low Carbon Hydrogen Agreement: How the revenue support works and key risks for more information on the LCHA.

Carbon Capture Utilization and Storage (CCUS)

Revenue support for new CCUS enabled hydrogen production facilities will be allocated through the Hydrogen Production Business Model (HPBM) as part of the CCUS Cluster Sequencing Process. In 2024, the Government committed £21.7 billion over 25 years to establish the UK’s CCUS industry, the announcement of which will help to accelerate the low carbon hydrogen sector.

Hydrogen use

The 2024 update sets out the UK Government’s expectations on hydrogen use, including:

• Power: Hydrogen is expected to provide 2-7GW of dispatchable capacity by 2030.
• Industry: The £500 million Industrial Energy Transformation Fund, (IETF) supports over 150 sites transitioning to low-carbon technologies.
• Transport: The Tees Valley Hydrogen Transport Hub, funded with £13 million, is trialling hydrogen in transport.
• Aviation: The Sustainable Aviation Fuel Mandate (SAF Mandate), effective from 2025, requires 2% of jet fuel to come from sustainable sources, increasing to 10% by 2030.
• Off-road Machinery: Regulations for hydrogen-powered machinery on roads are being finalized, effective 2025.

Hydrogen transport and storage and networks

Since publishing the initial designs of the Hydrogen Transport and Storage Business Models in 2023, detailed design work is progressing. The first rounds are expected to be detailed in 2025 and opened soon after.

• The Hydrogen Transport Business Model aims to incentivize regional pipeline infrastructure by 2030.
• The Hydrogen Storage Business Model aims to support up to two large-scale storage projects by 2030.

The UK Government is also identifying further transport and storage requirements to inform future allocations, with results to be published in due course.

For more information revenue support for hydrogen transport and storage infrastructure in the UK, see our briefing : Government funding for hydrogen transport and storage infrastructure in the UK: What do project developers need to know?

Supply chain development

The 2024 update signals the UK Government's intention to partner with industry to identify supply chain strengths and opportunities, and consider development proposals, including mobilising investment for the UK's clean energy and growth industries, including hydrogen supply chain support under the National Wealth Fund and Great British Energy's aim to deliver a comprehensive package of support for domestic energy supply chains.

In addition, Hydrogen UK's industry-led ‘Hydrogen Supply Chain Strategic Assessment’, published in the Autumn, identifies key growth areas in the hydrogen supply chain, aiming for 50% UK content in projects by 2030. 

What does the future hold for hydrogen policy in the UK?

The 2024 update set out a number of forward-looking commitments for the years(s) ahead, including:

Hydrogen production

• Outcome of HAR2 to be announced “in due course”. 
• Conduct a market engagement exercise on the proposed design and delivery of HAR3 in 2025.
• In the next year, to review whether, and when, to move to price-based competitive allocation (e.g. auctions) for the HAR scheme.

Hydrogen use

• Conduct a market engagement exercise and publish an update to the Hydrogen to Power (H2P) Business Model in spring 2025.
• Consult, in early 2025, on transmission-level blending within Great Britain, with a policy decision on such blending to be taken later in 2025.
• Consult on the use of hydrogen for heating in 2025.

Transport and storage and networks

• Publish details for the first rounds of the Hydrogen Transport Business Model and the Hydrogen Storage Business Model in 2025.

Sector development

• Launch of the UK's Industrial Strategy in the Spring 2025, which will set out support for UK supply chains for clean energy sectors.

Conclusion

Overall, the 2024 update is a promising blueprint for rapidly advancing UK hydrogen sector. NRF's team of hydrogen experts have seen first-hand the ramping up of the UK hydrogen sector and are well placed to assist its clients navigate the upcoming policy and funding developments outlined for the year(s) ahead.