The UK’s low-emissions hydrogen industry has raised concerns about Prime Minister Rishi Sunak’s recent changes to key climate policies, saying they undermine investor confidence in the sector. Hydrogen UK, a trade group, stressed the importance of ambition, clarity and consistency from the government to attract investment. The limited subsidies and support mechanisms in the UK compared to other jurisdictions such as Germany and Norway have deterred investors from producing green hydrogen in the country.
The HydrogenOne fund, which invests in green hydrogen projects, infrastructure and production, stressed that the UK is not an attractive location for green hydrogen investment. While the UK and continental Europe had similar hydrogen production costs in August, the fund highlighted that Germany and Norway offered more favorable conditions for the development of green hydrogen projects.
Adding to these concerns, Prime Minister Sunak also scrapped plans to ban the installation of gas boilers in new homes from 2025. Instead, households will only have to switch to heat pumps by 2035, and only when replacing an existing gas boiler. HydrogenOne’s managing partners expressed concern about the UK government’s policy direction and viewed the addition of hydrogen to the gas network as a positive step towards decarbonising home heating.
The UK Government’s first hydrogen funding process (HAR1) is not affected by these policy changes. The participants involved in the allocation of funds continue to engage positively with the Department of Energy Security and Net Zero (DESNZ) and pursue their projects. The aim of the funding allocation is to support low-emission hydrogen production through 15-year contracts that close the cost gap between low-emission and high-emission fuels.
Despite these challenges, the UK government is currently exploring the possibility of injecting up to 20% hydrogen into the natural gas network, which would not only provide a flexible reserve for future clean hydrogen producers, but also contribute to decarbonization efforts.
