The UK says it will finalize a plan to subsidize low-carbon hydrogen production by the end of this year, with the first project support contracts due in 2023.
Despite a global push for clean hydrogen, no country has yet implemented a national subsidy program that would allow green or blue H2 compete on price with cheaper but highly polluting gray hydrogen made from relentless natural gas.
However, Germany has launched a subsidy scheme for green hydrogen imported from outside the EU as part of its H2Global program.
The government’s Contracts for Difference (CfD) scheme, billed as a “variable premium price support model”, would provide a subsidy representing “the difference between a ‘strike price’ reflecting the cost of hydrogen production and a “reference price” reflecting the market value of hydrogen”.
The agreement would include a “contractual mechanism to induce the producer to increase the selling price and thereby reduce the subsidy” and would provide “volume support via a sliding scale in which the strike price (and therefore the subsidy) is more high per unit if hydrogen uptake decreases”.
The Department for Business, Energy and Industrial Strategy (BEIS) said it “intends to pursue” the policy, following a favorable public consultation.
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“We aim to finalize the hydrogen business model in 2022, and to award the first support contracts for projects taking final investment decisions from 2023,” he explains.
A levy to finance the system would be introduced “from 2025 at the latest, subject to consultation and legislation, the first electrolysis projects being financed by general taxation if they are operational before the entry into force of the levy. “.
The government has said it will define “low carbon hydrogen” as H2 produced with less than 2.4 kg of CO2– equivalent emissions for each kilogram of hydrogen produced — including upstream emissions.
The subsidy scheme, which the government calls a “business model”, was unveiled with a wide range of hydrogen-related announcements by BEIS on Friday afternoon.
These include £240m ($312.8m) Net Zero Hydrogen Fund to support the development and investment costs of low-carbon H2 projects, guidance on reporting greenhouse gas emissions for low-carbon hydrogen producers and studies on hydrogen global warming potential and future fugitive H2 emissions.
He unveiled plans on Thursday to produce 10 GW of carbon-free hydrogen by 2030half of which would be green hydrogen, mainly from excess offshore wind power.
Another fund, the £26 million Hydrogen Industrial Acceleration Programwas announced in February, to provide support for “innovation projects that can demonstrate the end-to-end industrial fuel shift to hydrogen”.
This article was amended on April 12 to highlight that Germany has already launched its H2Global subsidy program for imported green hydrogen.