Hydrogen Market Development:

The clean energy targets and project funding initiatives across globe show that the transformation of
global energy system is well underway. The hydrogen economy is a crucial area of action. It is an
opportunity to capitalize on technological development, establishing a route to decarbonize industry
and to transition the power and transport sectors. It will also stimulate economic growth and bring in
new employment opportunities and investments across the breadth and length.

To develop the hydrogen economy/infrastructure IEA recommended key points to scale up hydrogen:

1. Develop strategies and roadmaps on hydrogen’s role in energy systems.

2. Create strong incentives for using low-carbon hydrogen to displace fossil fuels.
3. Mobilise investment in production assets, infrastructure and factories.
4. Provide strong innovation support to ensure critical technologies reach commercialisation
quickly.
5. Establish appropriate certification, standardisation and regulation regimes.
6. Focus on four key opportunities to further increase momentum over the next decade
 Make the most of existing industrial ports to turn them into hubs for lower-cost,
lower-carbon hydrogen.
 Use existing gas infrastructure to spur new clean hydrogen supplies.
 Support transport fleets, freight and corridors to make fuel-cell vehicles more
competitive.
 Establish the first shipping routes to kick-start the international hydrogen trade.

UK is building a strong chapter out of this recommendations.

UK government announced a doubling of its objective to produce up to 10GW of low-carbon hydrogen

output by 2030, depending on affordability and value for money, having at least half of this capacity
coming from electrolytic hydrogen. By 2025, UK hope to have up to 1GW of electrolytic hydrogen and
1GW of CCUS-enabled hydrogen in operation or under construction.

 Established a Net Zero Hydrogen Fund (NZHF) and Hydrogen Production Business Model
(HPBM)
 Provided a clear vision for investors on how and when hydrogen will scale-up beyond the
first round of projects.

Figure 1: Timeline of government funding milestones and suggestions to support industry decision-making.
The UK government has awarded funding to 11 successful electrolytic hydrogen projects under its
first hydrogen allocation round (HAR1), totaling 125 MW. The 11 projects that were selected for
funding were given an average strike price of GBP241/MWh, which is equivalent to around
GBP8.03/kg or $10.23/kg if a lower heating value is used. This amount was supported by almost
GBP2 billion in revenue assistance from the Hydrogen Production Business Model.
The Strike price and floor Mechanism:
The weighted average strike price is determined by the total hydrogen volumes projected
over the contract's duration and varies according to the natural gas reference price. Through
15-year contracts, the business model provides financial support to hydrogen producers by
bridging the operating cost gap between low-carbon and higher-carbon fuels. The Low Carbon
Hydrogen Agreement subsidy, modelled after contracts for difference used in renewable
energy generation, will pay the difference between an achieved low-carbon hydrogen sales
price and a strike price, with the natural gas price serving as a floor. The strike price is the unit
price required for a low-carbon hydrogen producer to cover production costs plus a "allowed
return on investment.
The UK government also plans future allocation rounds in 2024 and 2026, with an ambition
of supporting an additional 1.5 GW of electrolytic hydrogen production capacity.
This commitment gives hydrogen developers, investors and supply chain companies the certainty
they need.