RenewableUK and Hydrogen UK call for policy reforms to cut green hydrogen costs 

RenewableUK and Hydrogen UK have released a joint report titled “Splitting the Difference – Reducing the Cost of Green Hydrogen to Accelerate Deployment”, outlining key measures to lower hydrogen production costs and stimulate demand. 

The report highlights that implementing its recommendations could reduce the cost of hydrogen from £241 ($299) per megawatt-hour (MWh)—the price set in the UK’s first Hydrogen Allocation Round in 2023—to below £100/MWh. This cost reduction is seen as essential for scaling up hydrogen production and integrating it into the UK’s decarbonisation strategy. 

The report emphasises that the UK has significant potential to generate green hydrogen using renewable electricity through electrolysis—a process that splits water into hydrogen and oxygen. By scaling up production, the country could benefit from economies of scale and technological advancements, making green hydrogen more competitive. 

Affordable green hydrogen is expected to play a crucial role in the future energy system, offering long-duration storage for surplus electricity and helping decarbonise key industrial sectors, including steel, chemicals, and shipping. However, its widespread adoption depends on significantly reducing production costs. 

Currently, electricity costs account for around 70% of the final price of green hydrogen, making price reductions in power supply a priority. The report outlines eleven key recommendations aimed at lowering the cost of electrolysis and developing a more cost-effective hydrogen industry. 

The report calls on the UK Government to implement a series of reforms aimed at accelerating the transition to green hydrogen. One of the key recommendations is the reform of the Hydrogen Production Business Model (HPBM). The report suggests setting more realistic strike prices to attract investment, ensuring that hydrogen production becomes financially viable for developers and businesses looking to enter the market. 

Another significant proposal is to incentivise electrolysis to take place at locations and times when electricity prices are at their lowest. By aligning hydrogen production with periods of surplus renewable energy, efficiency can be improved while minimising wasted electricity due to grid limitations.

To further support hydrogen expansion, the report advocates for removing barriers that prevent hydrogen producers from co-locating their projects with existing renewable energy sites that already have planning consent. This would allow developers to take advantage of established infrastructure, reducing the time and cost associated with setting up new production facilities. 

Another critical recommendation is the development of a hydrogen transmission network with pipelines linking Scotland, England, and Wales. Such infrastructure would facilitate the efficient transport of green hydrogen across the country, ensuring that industries and businesses in different regions have access to a stable and reliable supply. 

Lastly, the report highlights the need to lower grid access charges for hydrogen project developers. Reducing these costs would make hydrogen production more economically viable and encourage further investment in the sector. By implementing these measures, the UK can accelerate the deployment of green hydrogen, supporting its broader decarbonisation and energy security goals. 

Dan McGrail, Chief Executive of RenewableUK said, “Green hydrogen generated from renewables will play an important role in helping the Government to achieve its clean power mission. It can add vital flexibility to our energy system, as it can be stored and used whenever it is needed.”

Clare Jackson, CEO of Hydrogen UK said, “This report, a combined effort from the trade associations, marks pivotal steps towards achieving our national goals in energy security and clean energy transition by making hydrogen an economically viable option.” 

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