UK hydrogen has taken a hit in the government’s autumn budget, with the funding mechanism for Hydrogen Allocation Round (HAR) projects scrapped, and £500m ($669m) allocated for the first regional hydrogen network cut.
The budget delivered on Wednesday (28 October) was aimed at supporting cost of living pressures, with extended cuts on domestic electricity and direct energy payments to some households.
Among Chancellor John Healey’s measures was the scrapping of the Gas Shipper Obligation, which was designed to fund the UK’s HAR projects with revenues from levies on gas operators.
While it doesn’t impact HAR 1 developments, which have already signed funding agreements, the 27 projects shortlisted for HAR 2 funds will now be funded through the Treasury.
According to lobbyist Beyond 2050, HAR 2 funding will now be subject to future funding allocations.
“This removes the dedicated route that was intended to provide long-term funding for the Hydrogen Production Business Model and means that the sector faces more uncertainty as we wait for further details,” it wrote.
However, Beyond 2050 said HAR 2 projects are likely to be progressed to the “invite to offer” stage, potentially ending over 12 months of limbo for the shortlisted developments.
£500m promised by the former government in 2025 to develop the country’s first regional hydrogen pipeline network will also be reallocated.
H2 View understands up to £300m ($401.5m) in equity or loans may be available for “strategically important hydrogen projects,” although no further details have been shared.
It comes as another setback for the UK hydrogen sector, which has been calling for enhanced and accelerated support for over a year amid delays to a promised refresh of the national hydrogen strategy and funding schemes.
Clare Jackson, CEO of Hydrogen UK, said the budget will leave many energy sector players “concerned” about how the cuts support the government’s ambition to reindustrialise the UK.
“Reductions in capital grants and decisions deferred to next year’s spending review mean businesses still need greater certainty,” she said.
Ahead of Andy Burnham becoming Prime Minister, a group of nine hydrogen and fuel cell businesses and two trade bodies signed a letter to ministers warning that delays were eroding investor and board confidence.
The companies warned that some were considering whether investments planned for the UK should be “moved abroad” or “dropped completely.”
Since then, one of the signatories, Chesterfield Special Cylinders, said it would pivot away from hydrogen and back toward defence markets, while its hydrogen-supporting CEO Chris Walters resigned.
Those concerns have also been echoed by advisers to the sector. At Hydrogen UK’s Annual Conference in March, Kim McCann, Global Energy Advisory Director at SLR Consulting, said capital was already moving from UK hydrogen projects towards faster-moving markets.”
