The following is an introduction to our UK Hydrogen Guide 2025. To read the guide in full, select 'Read full article'.

Part 1: Market overview

UK Policy Overview

The UK remains an attractive and stable market for developers and investors in the low carbon hydrogen sector. The UK government has acknowledged the pivotal role that hydrogen can play in achieving the UK's net zero targets and the need to stimulate supply and demand for low carbon hydrogen in tandem. Consistent with this, in recent years the UK government has demonstrated sustained support for the low carbon hydrogen production chain by implementing a number of funding and policy frameworks, most notably the Hydrogen Strategy (August 2021), the British Energy Security Strategy (2022), the Hydrogen Investor Roadmap (February 2024) and the funding support pledged for the hydrogen sector in the UK government's 2024 Budget.

The UK's target is for the market to deploy up to 1GW of low carbon hydrogen production capacity by the mid-2020s, ramping up to 10GW by 2030. In tandem, the Scottish government has set a goal of 5GW of hydrogen production in Scotland by 2030. The UK government has taken a 'twin-track' approach to achieving its 10GW hydrogen production target as follows:

• 4GW installed capacity by 2030 of carbon capture and storage (CCS)-enabled hydrogen (i.e. 'blue' hydrogen), which is considered a transition technology in the path to the development and commercialisation of the green hydrogen sector and will be supported by the UK's rapidly developing CCS projects and extensive geological stores;
  and
• 6GW installed capacity of electrolytic production (i.e. 'green' hydrogen) by 2030.

In recognition that the development of the UK hydrogen value chain requires government support to stimulate investment and drive production, the UK government offers supply side funding support in the form of:

• the Hydrogen Production Business Model (HPBM), which was initially announced to the market in 2020 with initial draft contracts made publicly available after a consultation process in December 2022 which were updated in August 2023 (see further details below); and
• the £240 million Net Zero Hydrogen Fund (NZHF).

The UK government also intends to drive demand for low carbon hydrogen produced in the UK by:

• introducing a cost for carbon through the UK Emissions Trading Scheme (UK ETS), which currently applies to certain aviation activities and energy intensive industries (e.g. the production of ammonia) and is expected to be expanded to certain domestic maritime transport in 2026 and waste incineration in 2028;
• providing funding through the Industrial Hydrogen Accelerator Programme for innovative projects that can demonstrate end-to-end industrial fuel switching to hydrogen, e.g. the 'Hydrogen for the Decarbonisation of Sheffield Steel' project which is assessing the technical and commercial feasibility for end-to-end hydrogen production, transport and end-use in the steel manufacturing industry; and
• setting policies targeting specific sectors, e.g. the Renewable Transport Fuel Obligation (RTFO) which requires fuel suppliers to ensure a certain percentage of their supply constitutes renewable fuel (currently set at 9.6% of total fuel supplied, increasing to 14.6% in 2032).

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