Green hydrogen is rapidly emerging as a key player in the UK's transition to a low-carbon economy. As the country strives to meet its ambitious climate targets, the development of a robust green hydrogen market has become a top priority. This clean energy carrier, produced through electrolysis using renewable electricity, has the potential to decarbonise sectors that are difficult to electrify directly.
The UK green hydrogen sector is poised for significant growth in the coming years. With increasing production capacity, expanding infrastructure, and growing demand across various industries, the market is gaining momentum. This article examines the current state of the UK hydrogen market, explores production and infrastructure developments, and assesses the regulatory framework shaping its future. It also looks at the key demand sectors and market opportunities that are driving the expansion of green hydrogen production in the UK.
The UK green hydrogen market is rapidly evolving, with the government setting ambitious targets to establish the country as a world-leading producer of this clean energy source. The United Kingdom has several strategic advantages that position it well in the global hydrogen landscape, including abundant renewable resources, geological assets, and a skilled workforce [1]. The government has set a goal to develop up to 10GW of low-carbon hydrogen production capacity by 2030, with at least half coming from electrolytic hydrogen [2].
The UK government has implemented various measures to stimulate the growth of the green hydrogen sector. In December 2023, the Department for Energy Security and Net Zero announced support for 11 major projects to produce green hydrogen through electrolysis . These projects represent the largest number of commercial-scale green hydrogen production initiatives announced at once anywhere in Europe, demonstrating the UK's commitment to becoming a frontrunner in this emerging industry.
The government has also introduced a supportive policy framework, including the Hydrogen Production Business Model (HPBM) and Low Carbon Hydrogen Standard (LCHS), which are setting industry benchmarks and attracting global attention [1]. Additionally, the £960 million Green Industries Growth Accelerator (GIGA) fund has been established to support private sector investment in clean energy supply chains, including hydrogen .
The 11 successful projects announced in December 2023 will invest over £400 million in the next three years, generating more than 700 jobs across the UK . These initiatives will deliver 125MW of new hydrogen production capacity, supporting various businesses in their decarbonisation efforts. For instance, Sofidel in South Wales plans to replace 50% of their current gas boiler consumption with hydrogen at their Port Talbot paper mill .
Despite the progress, the UK green hydrogen sector faces several challenges. One significant barrier has been the slow adoption of green hydrogen over the past decade . Public perception and awareness have been identified as key factors influencing this slow uptake. Many people are either unaware or indifferent to the use of hydrogen as an energy vector, which has stalled progress in some areas .
Another challenge has been the complexity of the planning process for hydrogen projects. Participants in a recent study commissioned by the Department for Energy Security and Net Zero highlighted concerns about the level of complexity and the significant resource constraints in examining bodies and other statutory consultees . The lack of experience with hydrogen in local authorities and other statutory consultees was also identified as a key barrier .
The UK's green hydrogen sector is poised for significant growth, with ambitious targets set to establish the country as a world-leading producer of this clean energy source. The government has set a goal to develop up to 10GW of low-carbon hydrogen production capacity by 2030, with at least half coming from electrolytic hydrogen [1]. This commitment is backed by substantial investments and strategic initiatives aimed at expanding production capacity and developing the necessary infrastructure.
The UK's abundant offshore wind resources position it ideally to scale up electrolytic hydrogen production. With 10 GW of installed capacity and a further 16 GW in pre-construction or under planning, the UK's offshore wind market is already one of the largest in the world [2]. The British Energy Security Strategy, published in April 2022, increased the UK's 2050 offshore wind target from 40 GW to 50 GW, reflecting the government's growing commitment to this renewable energy source [2].
Offshore wind has the potential to transform the UK's energy system, particularly in the production of green hydrogen. During periods of peak generation, when supply exceeds the grid's capacity, excess renewable electricity can be used to produce green hydrogen through electrolysis [2]. This approach not only maximises the utilisation of offshore wind resources but also addresses the issue of curtailment, which cost Britain 2.3 TWh in lost generation and £507 million in curtailment payments in 2021 [2].
The UK is at the forefront of developing and deploying cutting-edge technologies for efficient and sustainable hydrogen production. Advanced electrolysers and pioneering methods are unlocking new pathways for hydrogen generation . The government has implemented various measures to stimulate the growth of the green hydrogen sector, including support for 11 major projects to produce green hydrogen through electrolysis .
These projects represent a significant step forward in scaling up the UK's hydrogen economy. They will deliver 125MW of new hydrogen production capacity, supporting various businesses in their decarbonisation efforts . For instance, Sofidel in South Wales plans to replace 50% of their current gas boiler consumption with hydrogen at their Port Talbot paper mill .
To support the growing hydrogen economy, the UK is developing robust storage and distribution infrastructure. UKEn is building the UK's largest hydrogen storage site, with up to 2 billion cubic metres capacity, which is expected to provide up to 20% of the UK's predicted hydrogen storage needs in 2035 . This facility will double the UK's existing underground storage capacity and include a system-level hydrogen battery to store excess renewable power for later peak power demand use .
Salt caverns are being utilised for hydrogen storage due to their flexibility, modularity, and proven reliability. These underground storage sites have a small surface footprint and low operational costs compared to other forms of geological storage . The development of dedicated hydrogen pipelines and the conversion of existing natural gas pipelines for hydrogen transport are also underway, ensuring seamless and efficient delivery from production sites to points of use .
The UK green hydrogen market is poised for significant growth across various sectors, presenting numerous opportunities for investment and development. As the country transitions away from fossil fuels, hydrogen offers a viable solution for reducing emissions while ensuring energy security and economic growth.
Green hydrogen has the potential to revolutionise heavy British industry, providing a clean alternative to fossil fuels. The industrial sector is a key target for decarbonisation efforts, with hydrogen playing a crucial role in reducing emissions. Through the BEIS £60 million Industrial Fuel Switching competition, hydrogen is being researched and demonstrated in the steel, chemicals, glass, and food and drinks sectors [1]. This initiative aims to accelerate the adoption of hydrogen technologies in these carbon-intensive industries.
The transport sector, which is the largest single contributor to UK domestic greenhouse gas emissions, is a prime candidate for hydrogen adoption. Hydrogen is expected to play a key role in decarbonising various modes of transport, including buses, trains, and heavy goods vehicles (HGVs) [2]. The government has implemented several initiatives to support hydrogen use in transport, including the £23 million Hydrogen for Transport Programme . Additionally, the Tees Valley Hydrogen Transport Hub will host a £20 million competition to discover how hydrogen can be used to decarbonise the transport sector .
Green hydrogen has the potential to transform the UK's energy system, particularly in power generation. During periods of peak renewable energy generation, excess electricity can be used to produce green hydrogen through electrolysis. This approach not only maximises the utilisation of renewable resources but also addresses the issue of curtailment. Manufacturers, including Mitsubishi, Siemens, and GE, are conducting research and innovation programmes to develop 100% hydrogen-fuelled power generation, expected to be commercially available by 2030 .
The UK's green hydrogen sector presents significant export opportunities, particularly to continental Europe. With increasing hydrogen demand and established energy trading and interconnection with the UK, there is potential to export hydrogen at scale . The Scottish Hydrogen Action Plan estimates that a renewable hydrogen sector with a strong focus on exports could support up to 300,000 jobs and contribute up to £25 billion to GVA by 2045, in Scotland alone . This export potential not only boosts economic growth but also positions the UK at the forefront of decarbonisation efforts, enabling it to support the transition of European countries with limited access to low-cost renewables or large-scale geological hydrogen and CO2 storage.
The UK government has taken significant steps to develop a thriving low-carbon hydrogen sector. The UK Hydrogen Strategy, published in August 2021, sets out a comprehensive roadmap for the development of the hydrogen economy over the 2020s. This strategy aims to deliver the increased ambition for up to 10GW of low-carbon hydrogen production capacity by 2030, with at least half coming from electrolytic hydrogen [1].
The strategy outlines a twin-track approach, supporting both electrolytic 'green' and carbon capture (CCUS)-enabled 'blue' hydrogen production, alongside other potential production routes. This approach is designed to enable rapid growth of the sector while bringing down costs [1]. The government has also implemented various measures to stimulate growth, including support for 11 major projects to produce green hydrogen through electrolysis .
To overcome the economic challenges of producing low-carbon hydrogen compared to cheaper high-carbon alternatives, the government has introduced several funding mechanisms. The £240 million Net Zero Hydrogen Fund (NZHF) supports immediate construction and other capital costs for hydrogen production projects [2]. Additionally, the Hydrogen Production Business Model (HPBM) has been designed to provide longer-term support [2].
In December 2023, the government announced backing for 11 major projects to produce green hydrogen through electrolysis. These projects will receive a guaranteed price from the government for the clean energy they supply . This support has resulted in over £400 million of investment in the next three years, generating more than 700 jobs across the UK .
The UK government recognises the importance of international collaboration in developing the hydrogen economy. In December 2023, the UK and Germany signed a Joint Declaration of Intent to work together on underpinning the international trade in hydrogen . This partnership aims to accelerate the role of low-carbon hydrogen in both nations' energy mix and show the world how to expand new, net zero-friendly markets .
The agreement focuses on five key pillars of collaboration: accelerating the deployment of hydrogen projects, establishing international leadership on hydrogen markets, promoting research and innovation, facilitating trade, and conducting joint market analysis . This partnership is expected to make hydrogen technologies cheaper and more accessible, potentially lowering energy costs for consumers in the future .
The UK is also exploring opportunities to export hydrogen, particularly to continental Europe, where there is increasing hydrogen demand alongside established energy trading and interconnection with the UK [1]. These international partnerships are crucial for developing thriving domestic, regional, and ultimately international hydrogen markets.
The UK's green hydrogen sector is on the brink of a major breakthrough, with strong government backing and ambitious targets to establish the country as a world-leading producer. The combination of abundant renewable resources, cutting-edge technology, and a supportive regulatory framework is paving the way for rapid growth in production capacity and infrastructure development. This growth has an impact on various sectors, including industry, transport, and power generation, opening up new opportunities to cut emissions and boost economic growth.
Looking ahead, the UK's green hydrogen market is well-positioned to play a crucial role in the country's transition to a low-carbon economy. The government's twin-track approach, supporting both green and blue hydrogen production, along with international partnerships, is likely to speed up the development of thriving hydrogen markets at home and abroad. As the sector continues to grow, it has the potential to create thousands of jobs, attract significant investment, and help the UK meet its ambitious climate targets, cementing its position as a global leader in clean energy innovation.
[1] - https://www.gov.uk/government/publications/uk-hydrogen-strategy/uk-hydrogen-strategy-accessible-html-version
[2] - https://hydrogen-uk.org/hydrogen-in-the-uk/
[3] - https://royalsociety.org/news-resources/projects/low-carbon-energy-programme/hydrogen-roadmap/
[4] - https://www.gov.uk/government/news/boost-for-uk-hydrogen-as-government-backs-world-leading-industry