UK to sign remaining CfDs for first H2 round in May

The UK hopes to sign long-awaited subsidy contracts with the remaining projects from its first hydrogen allocation round (HAR1) in May, minister of state for the department of energy security and net zero, Sarah Jones, said.

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The UK will also “very shortly” unveil a shortlist of projects selected for subsidies of a larger second round (HAR2), Jones said at the Hydrogen UK conference in Birmingham today. But the announcement will hardly satisfy UK developers who have been expecting the shortlist any day since late 2024. The missing list was the top talking point among delegates at the event.

The UK has signed 15-year contracts-for-difference (CfDs) with four of the 11 renewable hydrogen projects selected in HAR1, according to the latest information from the Low Carbon Contracts Company (LCCC), the government-backed counterparty.

Finalising the rest of the CfDs is long-overdue in the eyes of many developers because the UK first announced its winners in December 2023. The process was delayed by the general election last summer and concerns around the Climate Change Levy (CCL) charged on electricity supply, among other issues.

The new government took a step towards assuaging concerns about the CCL last week which might allow more projects to sign contracts.

But HAR1 developers have warned that signing a CfD does not guarantee they will build projects straight away, since there is hardly any penalty for signing the subsidy deal. Some still need to finalise deals for power supply, construction contracts and financing, meaning it could still take time for signatories to take their final investment decisions.

The UK will also update its hydrogen strategy later this year, Jones said. “New evidence has emerged on cost, demand and expected operating patterns, and our understanding has evolved with time,” including on “how we can expect the hydrogen economy to develop over time,” Jones said.

The statements could indicate that the Labour government might amend the 10GW clean hydrogen production target set by the previous administration for 2030, according to one industry participant. The Conservative government’s 10GW goal from 2022 had included a sub-target for 6GW electrolytic production capacity.

The government will also reconsider the role of hydrogen in making steel in the UK, Jones said. The idea of using hydrogen for steel appeared to have little future in the UK under the previous government as concepts from the UK’s steel plants had made no tangible progress.

Source: Argus Media

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