UK government launches hydrogen economy plan

18 August 2021

The UK government intends to unlock billions of pounds in investment and add new export opportunities through its plans to create a thriving low carbon hydrogen sector in the UK over the next decade and beyond, the Business and Energy Secretary Kwasi Kwarteng announced on17 August.

The UK’s first Hydrogen Strategy drives forward the commitments laid out in the prime minister’s 10 Point Plan for a green industrial revolution by setting the foundation for how the UK government will work with industry to meet its ambition for 5 GW of low carbon hydrogen production capacity by 2030.

A UK-wide hydrogen economy could be worth £900 million and create over 9000 high-quality jobs by 2030, potentially rising to 100 000 jobs and £13 billion by 2050. 

Government analysis suggesting that 20-35% of the UK’s energy consumption by 2050 could be hydrogen-based, so this energy source could be critical to meeting targets of net zero emissions by 2050 and cutting emissions by 78% by 2035. 

The government’s approach is based on previous success with offshore wind, where early government action coupled with strong private sector backing has been very successful. One of the main tools used by government to support the establishment of offshore wind in the UK was the Contracts for Difference (CfD) scheme, which incentivises investment in renewable energy by providing developers with direct protection from volatile wholesale prices and protects consumers from paying increased support costs when electricity prices are high.

The government has therefore launched a public consultation on a preferred hydrogen business model which, built on a similar premise to the offshore wind CfDs, is designed to overcome the cost gap between low carbon hydrogen and fossil fuels, helping the costs of low-carbon alternatives to fall quickly, as hydrogen comes to play an increasing role in our lives. Alongside this, the government is consulting on the design of the £240 million Net Zero Hydrogen Fund, which aims to support the commercial deployment of new low carbon hydrogen production plants across the UK.

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