Splitting the difference, a report by RenewableUK and Hydrogen UK aims to demonstrate that the costs of green hydrogen production could be more than halved.

The recommendations in the report could take the cost of hydrogen from £241 per MWh, which was achieved in the first Hydrogen Allocation Round in 2023 to less than £100 per MWh, if they are fully implemented.

The report sets out strategic measures designed to make the most of the UK’s potential to use renewable electricity to produce hydrogen in electrolysers which split water into hydrogen and oxygen. Affordable green hydrogen will be an essential tool for building the energy system of the future, providing long duration storage for surplus electricity, and also for decarbonising sectors such as steel, chemicals and shipping.

For hydrogen to realise its full potential, it must become deployed at scale, and that means a cost reduction. The price of electricity used in the process of electrolysis currently represents around 70 per cent of the final cost of green hydrogen, so reducing this price is seen as an imperative and the report contains eleven key recommendations to pave the way for a more cost-effective electrolytic hydrogen industry by lowering electricity costs for electrolysis. These include:

• A call for the Government to reform the hydrogen production business model (HPBM) with realistic strike prices to secure the maximum amount of investment by companies entering this new market.
• Incentivising electrolysis to happen at the time and place when electricity is cheapest, to bring wider benefits to our energy system and avoid wasting electricity due to grid limits.
• Removing barriers to enable hydrogen producers to co-locate their projects with renewable energy generators which already have planning consent.
• An ambitious strategy to enable the development of a hydrogen transmission network, with pipelines linking Scotland to England and Wales to optimise the availability of green hydrogen.
• Reducing the charges which project developers have to pay for access to the electricity grid.

Clare Jackson, CEO of Hydrogen UK stated: “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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