UK offers first green hydrogen production contracts to HAR1 projects
The UK government has offered the first contracts to green hydrogen project developers under its debut allocation round, an energy department spokesperson told S&P Global Commodity Insights Dec. 12.
The contracts under Hydrogen Allocation Round 1 have been offered to projects via the Low Carbon Contracts Company, the Department of Energy Security and Net Zero spokesperson said by email.
The DESNZ spokesperson said,
Through our funding of GBP2 billion in the Budget, we are supporting 11 green hydrogen projects across England, Scotland and Wales — among the first commercial-scale projects anywhere in the world,
“This funding will unlock more than GBP400 million of private investment, creating over 700 jobs across the country.”
DESNZ is still evaluating applications under HAR2 and “will update on the second funding round in due course.”
HAR2 closed in April, offering support for up to 875 MW.
The HAR1 funding is to support 11 renewable hydrogen projects with total capacity of 125 MW, with funding confirmed in the new Labour government’s first budget on Oct. 30.
The projects will provide hydrogen to at least 35 offtakers, DESNZ said at the time.
The funding, originally announced by the previous government in December 2023, will cover the cost gap over 15 years between renewable hydrogen generation and the market price, with natural gas setting a floor.
HAR1 allocated funding to just half of the total capacity submitted.
The 11 successful projects were awarded at a weighted average strike price of GBP241/MWh (around GBP9.50/kg).
DESNZ said at the time,
This compares well to the strike prices of other nascent technologies such as floating offshore wind and tidal stream,
Platts, part of Commodity Insights, assessed the cost of producing hydrogen via alkaline electrolysis in the UK (including capex) at GBP6.96/kg ($8.86/kg) Dec. 11, based on month-ahead grid power prices. PEM electrolysis production was assessed at GBP7.14/kg.
Projects will be paid once they become operational. An additional GBP90 million from the Net Zero Hydrogen Fund will support project construction.
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UK offers first green hydrogen production contracts to HAR1 projects, source
