The UK government has taken a significant step by offering contracts to green hydrogen projects through its inaugural Hydrogen Allocation Round 1 (HAR1).

This initiative is facilitated via the Low Carbon Contracts Company, as noted by the Department of Energy Security and Net Zero (DESNZ). With funding worth GBP2 billion, DESNZ is supporting 11 green hydrogen projects across England, Scotland, and Wales. This funding is anticipated to unlock over GBP400 million in private investment and create more than 700 jobs nationwide. These projects, among the first commercial-scale efforts globally, are designed to provide hydrogen to at least 35 offtakers.

The HAR1 initiative aims to support projects with a collective capacity of 125 MW. The strike price for these projects, on average, is GBP241/MWh, equating to roughly GBP9.50/kg. This pricing compares favorably with other nascent technologies like floating offshore wind and tidal stream. The funding, initially announced by the previous government, spans 15 years to cover the cost gap between renewable hydrogen generation and market price, with natural gas setting a price floor.

While HAR1 has already allocated funding for about half of the total capacity submitted, DESNZ is evaluating applications for the second round, known as HAR2. This round, which closed in April, offered support for up to 875 MW.

As of December 11, producing hydrogen via alkaline electrolysis in the UK, inclusive of capital expenditure, was assessed at GBP6.96/kg. Production through PEM electrolysis was slightly higher at GBP7.14/kg.