Is the Promise of Green Hydrogen Fading - or Just Facing Growing Pains?

Green hydrogen has long been heralded as a cornerstone of the UK’s clean energy transition (5GW by 2030 as part of 10GW low carbon hydrogen target) — a vital piece of the puzzle for decarbonising hard-to-abate sectors like heavy industry, transport, and heat. But as recent headlines show, the road to delivering on this promise is proving far from straightforward.

In the past year alone, we’ve seen a string of major developers either scale back or shelve their UK green hydrogen ambitions:

• BP pulled the plug on its flagship HyGreen Teesside project, which had once been positioned as a keystone in the UK’s hydrogen strategy. While its blue hydrogen sister project (H2Teesside) remains active, the cancellation of HyGreen reflects a clear pivot away from green hydrogen — at least for now.
• Statkraft paused development of its Trecwn Green Energy Hub in Wales due to delays in securing a grid connection. Ironically, the very infrastructure meant to help decarbonise the grid is being held up by the grid.
• SSE and Equinor dropped the green hydrogen component from their Dogger Bank D offshore wind plans, opting to stick solely to electricity generation. One assumes the green hydrogen was plan B to the grid connection.
• ITM Power, the UK’s leading electrolyser manufacturer, reduced production targets and scrapped plans for a new factory, reflecting lower-than-expected market demand.

Why is this happening?

Despite strong rhetoric from government and industry alike, there are a number of practical and policy barriers undermining the case for investing in UK green hydrogen today:

1. Economic Viability

Green hydrogen production remains costly, primarily due to the expenses associated with electrolysis and the required renewable electricity. Currently, green hydrogen in the UK is more than three times as expensive as blue or grey hydrogen, which are produced from natural gas with or without carbon capture. This significant cost differential poses a substantial barrier to widespread adoption.

2. Infrastructure and Grid Constraints

The UK's existing grid infrastructure presents challenges for green hydrogen projects. Delays in securing grid connections, as seen in the Trecwn project, can stall development timelines and increase costs. Moreover, the current grid struggles to accommodate the intermittent nature of renewable energy sources, leading to inefficiencies and potential curtailment of renewable generation.

3. Policy and Regulatory Uncertainty

While the UK government has set ambitious targets for hydrogen production, there is a noticeable absence of detailed policy frameworks and support mechanisms to achieve these goals. Industry stakeholders have called for a comprehensive roadmap that outlines specific enabling policy actions and investment pathways, providing clarity and confidence for investors and developers.

4. Demand and Market Development

Securing long-term offtake agreements remains challenging, as industries are hesitant to commit to green hydrogen without clear economic incentives. The lack of guaranteed demand hampers the ability of developers to justify investments in production facilities. Without robust market development strategies, the green hydrogen sector may struggle to achieve scale.

5. Skills and Workforce Development

The hydrogen sector requires a skilled workforce to support its growth. However, there is currently a shortage of workers with the necessary expertise, particularly in areas such as cryogenic handling and electrolysis technology. Addressing this skills gap is essential to ensure the successful deployment and operation of green hydrogen projects.

The Path Forward: Unlocking Green Hydrogen's Potential

Despite these challenges, green hydrogen remains a critical component of the UK's decarbonization strategy. To realise its potential, concerted efforts are needed across several fronts:

• Policy Development: Establishing a clear and detailed hydrogen roadmap that sets out specific policy actions, investment pathways, and timelines is crucial. This roadmap should provide certainty for investors and outline the government's vision for the role of hydrogen in the energy transition.
• Infrastructure Investment: Upgrading the grid to accommodate renewable energy sources and facilitate hydrogen production is essential. Investments in hydrogen transport and storage infrastructure will also be necessary to support the sector's growth.
• Market Stimulation: Implementing demand-side policies, such as quotas or mandates for hydrogen use in specific sectors, can help create a robust market. These measures would provide the necessary demand signals to encourage investment in production capacity.
• Workforce Development: Investing in education and training programs to develop a skilled hydrogen workforce is vital. Collaborations between industry, government, and educational institutions can help build the necessary talent pipeline.

But let’s not write off green hydrogen just yet.

Despite recent pullbacks, the underlying need for green hydrogen hasn’t gone away. The UK’s legally binding net-zero targets simply can’t be met without solutions for sectors that electricity alone can’t decarbonise. And when successful, green hydrogen can bring enormous benefits:

• Industrial decarbonisation: Green hydrogen can replace natural gas in steel, chemical and cement production — creating low-carbon supply chains.
• Energy security: Domestic hydrogen production reduces reliance on fossil fuel imports and volatile global gas markets.
• Job creation and innovation: The sector has the potential to generate thousands of high-quality jobs and position the UK as a leader in electrolyser technology and hydrogen infrastructure.
• Export opportunities: Countries like Germany, the Netherlands and Japan are eager to import clean hydrogen — if the UK can produce it cost-competitively.

There are green shoots. The government recently announced the shortlist of projects that are invited to the next stage of the HAR2 process. The shortlist contains 27 electrolytic projects across England, Scotland, and Wales. Add to this the 11 winners (125MW) from the first round (HAR1) are beginning to move forward. But if the UK wants to be a serious contender in this global race, it needs to move faster, with clearer long-term signals, simplified funding, and a planning and grid regime fit for purpose.

What would it take to make green hydrogen a bankable, investable part of the UK’s energy transition — and what’s needed most: policy clarity, guaranteed demand, or infrastructure reform?

We’d love to hear your thoughts — please share in the comments or get in touch.