Blog: How new hydrogen decisions could deliver a more certain future for gas

Funding for 11 new hydrogen production projects

DESNZ has confirmed that 11 green hydrogen projects will receive funding from its Hydrogen Production Business Model. This follows the launch of the first hydrogen allocation round (HAR1) in July 2022 and will see the selected projects receive a share of over £2 billion of revenue support once operational. The development and construction of the projects are supported by the Net Zero Hydrogen Fund (NZHF). They will also receive a guaranteed price for the energy they supply.

The 11 projects will create green hydrogen through electrolysis and are expected to create over 700 jobs across the UK. Government has also launched its next funding round (HAR2), which is now open for applications, and published its Hydrogen Production Delivery Roadmap. The roadmap sets out the plans for future allocation rounds, HAR3 and HAR4, in 2025 and 2026 which are expected to boost hydrogen capacity to 1.5GW. The paper also set out plans for project funding to help deliver up to 4GW of blue hydrogen and 6GW of green hydrogen by 2030.

The announcements confirm that hydrogen is set to play a significant role in our net zero transition, and should give businesses the confidence to invest in hydrogen projects here in the UK. It’s a significant step forward that also provides a level of certainty to help the gas industry prepare for its low-carbon future.

New pathway for hydrogen transport and storage

14th December also saw the publication of the Hydrogen transport and storage networks pathway which sets out the UK Government’s strategic vision for a future hydrogen transport and storage infrastructure.

The document represents an important milestone in the development of an effective hydrogen infrastructure - to support the evolving hydrogen economy. One key takeaway is the ambition to support up to two storage projects and associated regional pipelines, to be in construction or operational by 2030. It’s a clear sign that policymakers want the UK to lead the way on green hydrogen once again, after falling behind in recent times.

Alongside the pathway document, the Government also launched consultations on the first allocation round for the Hydrogen Transport Business Model and Hydrogen Storage Business Model. Both consultations will close on 1 February 2024, with allocation rounds set to open in Q3 2024, shortlisted projects announced in Q1 2025 and contracts awarded by the end of that year.

Further key takeaways from the pathway include an agreement in principle with the recent recommendation from the National Infrastructure Commission (NIC) that a core UK hydrogen network (or ‘backbone’) should be developed. This has received a positive response from National Gas, who remain committed to Project Union. The project will see 2,000km of over 7,500km of National Transmission System (NTS) repurposed to carry 100% hydrogen.

The document also lays out DESNZ’s ambitions and timeline for the Future Systems Operator (FSO), which will take over responsibility for strategic planning of the transport and storage infrastructure - beginning in 2026. The role of the FSO is a crucial one at the centre of the gas and electricity systems, with the primary goal of decarbonising energy and a duty to take a whole system approach. Their guidance will hopefully end siloed thinking and help get us to net zero faster.

Strategic hydrogen blending gets the go-ahead

The UK Government has previously committed to making a policy decision on blending by 2023, and 14th December saw them make the strategic decision to support blending of up to 20% hydrogen by volume into GB gas distribution networks.

DESNZ has been keen to stress that the implementation of hydrogen blending will depend on the outcome of safety trials, which will be led by the Health and Safety Executive (HSE). Assessment decisions are expected during 2024. If it does go ahead, blending will require a change to current legislation, which currently limits the amount of hydrogen in the mix to 0.1%, and there are also technical and process considerations which will need to be factored in. Blending at a commercial scale is therefore not expected to begin before 2025-26 at the earliest.

Despite some obstacles yet to be overcome, 20% blending would bring us back in line with our EU neighbours and represent an important step towards the creation of a successful hydrogen economy. DESNZ recognises the economic value it could deliver, stating in its policy document that “support for blending would aim to reduce production and system costs whilst facilitating the growth of the hydrogen economy.”

While blending is only proposed as a transitional option, it has enormous potential to help manage the risks faced by hydrogen producers; by creating significant and steady demand, and to support investment confidence while the transport and storage infrastructure is being developed. It could also help to propagate a whole system approach to energy, with green hydrogen producers using excess renewable energy which would otherwise have to be curtailed.

This announcement, alongside the others published on December 14th, hopefully signals the beginning of a new, more certain era for the gas industry - and recognition of the important role that hydrogen will play in our renewable energy future.