December 27, 2024 [Rigzone]- The United Kingdom government’s Low Carbon Contracts Company (LCCC) has signed the first three contracts under the Hydrogen Production Business Model.
The government says the model provides revenue support to producers to close the operating cost gap between low-carbon hydrogen and higher-emission fuels.
The three projects are Cromarty Hydrogen, led by Scottish Power Ltd. and Storegga Ltd.; Scottish Power’s Whitelee Green Hydrogen; and West Wales Hydrogen by Trafigura Group Pte. Ltd.
“These contracts will enable clean hydrogen production, reduce emissions across key industries and create jobs and investment opportunities”, LCCC said in an online statement.
“The Cromarty, Whitelee and West Wales projects represent first-of-a-kind hydrogen contracts in Great Britain and once operational, will have a combined capacity of 31.8MW”.
The British Energy Security Strategy has set a goal of up to 10GW of low-carbon hydrogen production capacity by 2030, at least half of which is targeted to come from electrolyzers. By 2025, the UK aims to have up to 1GW of electrolytic hydrogen capacity under operation or in construction.
Enrique Cornejo, head of energy policy at offshore energy industry group OEUK, said, “Today’s announcement kickstarts the first green hydrogen production projects in the UK”.
“These projects have been made possible by industry and government developing policy foundations such as the low-carbon hydrogen standard and the hydrogen production business model”, Cornejo added. “Mechanisms like this must continue to evolve and clear deployment timelines are essential to provide clarity to developers and investors”.
Cornejo urged the government to also support hydrogen produced using natural gas and supported with carbon capture.
Up to four GW of the 2030 ambition has been allotted to CCUS-enabled hydrogen, according to the Hydrogen Production Delivery Roadmap published online by the Department for Energy Security and Net Zero (DESNZ) December 2023.
Cromarty, Whitelee and West Wales are part of 11 projects selected under the UK’s First Hydrogen Allocation Round (HAR1), launched July 2022. Covering eight regions across England, Scotland and Wales, the 11 have a combined capacity of 125 megawatts, according to the notice of results published December 2023 by the DESNZ.
“HAR1 puts the UK in a leading position internationally: this represents the largest number of commercial-scale green hydrogen production projects announced at once anywhere in Europe”, said the notice published on the UK government’s online portal.
“This round will provide over £2 billion [$2.51 billion] of revenue support from the Hydrogen Production Business Model, which will start to be paid once projects become operational.
“Over £90 million from the Net Zero Hydrogen Fund has been allocated to support the construction of these projects.
“We have conducted a robust allocation process to ensure only deliverable projects that represent value for money are awarded contracts. The 11 projects have been agreed at a weighted average strike price of £241/MWh (£175/MWh in 2012 prices). This compares well to the strike prices of other nascent technologies such as floating offshore wind and tidal stream”.
In December 2023 the DESNZ launched the UK’s second HAR. This round aims to award up to 875MW of capacity, according to the Hydrogen Production Delivery Roadmap.
In the third and fourth HARs, the UK plans to allocate up to 1.5GW. The government expects to launch HAR3 and HAR4 in 2025 and 2026 respectively, according to the roadmap.
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