RenewableUK and Hydrogen UK have jointly released a groundbreaking report, "Splitting the Difference - Reducing the Cost of Green Hydrogen to Accelerate Deployment," outlining crucial measures to drive down green hydrogen production costs. If fully implemented, these recommendations could reduce the cost of hydrogen from the £241 per megawatt hour (MWh) achieved in the first Hydrogen Allocation Round in 2023 to under £100/MWh, a total of approximately 58%.

The report highlights strategic steps to maximize the UK's potential in using renewable electricity for hydrogen production via electrolysis. Unlocking economies of scale and leveraging technological advancements will be key to making green hydrogen an affordable and essential component of the future energy system. Renewable hydrogen offers long-duration storage for surplus electricity and plays a vital role in decarbonizing industries such as steel, chemicals, and shipping.

As hydrogen deployment scales up, costs are expected to decline significantly. A major factor in hydrogen production costs is electricity pricing, which currently accounts for approximately 70% of the total cost. Lowering these costs is crucial for making green hydrogen more competitive.

Source: RenewableUK

The report outlines eleven key recommendations to build a cost-effective electrolytic hydrogen industry, including:

• Reforming the hydrogen production business model (HPBM) with realistic strike prices to attract investment.

• Encouraging electrolysis at times and locations where electricity is cheapest, optimizing energy use and minimizing grid constraints.

• Removing barriers for hydrogen producers to co-locate with renewable energy projects that already have planning approval.

• Developing an ambitious hydrogen transmission network linking Scotland, England, and Wales to ensure efficient distribution.

• Reducing grid access charges for hydrogen project developers.
  
  

Industry leaders call for action

Dan McGrail, Chief Executive of RenewableUK, emphasized the importance of government collaboration:

"Green hydrogen generated from renewables will play an important role in helping the Government achieve its clean power mission. It adds vital flexibility to our energy system, as it can be stored and used when needed. This report shows that to realize its full potential, the Government must work with RenewableUK and Hydrogen UK to establish innovative business models that attract private investment. Strike prices should reflect the early-stage nature of this technology, and incentives should encourage electrolysers to be built alongside wind and solar farms to reduce costs."

McGrail added that enacting these key measures will help the UK's green hydrogen sector maintain its global leadership, driving down costs, creating thousands of jobs, and generating billions of pounds in economic activity by the end of the decade.

Clare Jackson, CEO of Hydrogen UK, echoed this sentiment:

"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."

With these strategic measures, the UK is poised to accelerate green hydrogen deployment, positioning itself as a leader in the global energy transition.