A seismic shift in the UK’s hydrogen market is underway following the government’s decision to remove the Climate Change Levy (CCL) on electricity used for electrolysis.
This policy change could significantly influence the cost dynamics of green hydrogen production, representing a strategic maneuver to bolster the country’s hydrogen economy. Historically, electrolytic hydrogen has faced stiff competition from fossil-based alternatives largely due to high electricity costs exacerbated by the CCL. This levy removal could catalyze the production of green hydrogen by making it a more economically viable option for various sectors. Key beneficiaries include renewable energy developers, industrial developers seeking low-carbon energy, and off-takers in emission-intensive sectors such as chemicals, steel, and cement where decarbonization is pressing due to both regulatory and investor pressures.
This development also revitalizes prospects for Long Duration Energy Storage (LDES) solutions. With the UK’s Battery Energy Storage System pipeline frequently oversubscribed, alternative storage technologies like hydrogen are gaining traction. Hydrogen storage projects offer viable solutions to issues like long grid connection wait times, risk of energy curtailment, and the demand for dispatchable power exceeding the typical 4–8 hour battery confines. Industrial users who require combined heat and power can also find value in this shift.
From a commercial vantage, the CCL exemption heralds a reconsideration of green hydrogen’s total cost of ownership, dramatically improving the feasibility of investing in such infrastructure especially when co-located with renewable energy sites or industrial clusters. This could lead to a surge in projects that were previously non-starters due to economic barriers.
Developers currently have an opportunity to shape the industry’s landscape by participating in the government consultation aimed at detailing the CCL exemption’s final implementation. The consultation phase provides stakeholders the chance to influence regulatory frameworks ensuring they are conducive to wider green hydrogen deployment.
With the regulatory environment shifting favorably, companies like BWB are strategically positioned to assist in the development of hydrogen projects. Their offerings encompass feasibility analyses, grid strategy development, and stakeholder engagement, all integral to navigating this evolving landscape. For stakeholders deeply vested in the decarbonization of industrial processes, this policy shift presents a crucial opportunity to influence and capitalize on emerging market conditions by embracing green hydrogen as a credible and economically sound component of their energy strategy.
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