On effectiveness of current energy policy instruments to make H2 production projects financially viable for developers: Case of the UK

Abstract

Hydrogen has been identified as a potential gamechanger and ambitious national targets have been announced by many governments around the world. However, the lack of clear policy signals at the country level remains a barrier and significant cost reduction progress is unlikely to be made unless the issue is addressed. The paper aims to assess whether current UK energy policies support an economic case for low-carbon and competitive H2 production. A financial model is developed for hypothetical H2 projects based in the UK. Price assumptions are assigned to a specific set of policies in combination with the key technical considerations for H2 production and estimated return. The study concludes that H2 development featuring electrolysers or carbon capture and storage cannot rely on market forces alone to reach full commercialisation and competitiveness in the UK. While policies improve the economic case for H2 in some key areas, existing frameworks are not ambitious enough to advance the transition to low carbon options such as Blue and Green H2. Moreover, current policies do not sufficiently disincentivise investments in emission-intensive alternatives.