UK hydrogen funding – are the taps finally being turned on?

金融 | 02/07/2025

On 13 June 2025, the UK Government announced a £500 million investment to accelerate development of the UK’s first regional hydrogen transport and storage network. The initiative aims to link hydrogen producers with key industrial users, supporting high-emission sectors such as iron, steel, chemicals, ceramics, and glass.

This investment serves as a flagship component of the government’s broader “Plan for Change”, a mission-led strategy to establish the UK as a clean energy superpower and to expedite progress toward net zero emissions.

UK Transport Bill

The UK’s Transport Bill, as enacted through the Energy Act 2023, represents a pivotal legal and financial framework underpinning the UK’s transition to a low-carbon hydrogen economy. It complements existing hydrogen production funding—such as the Net Zero Hydrogen Fund (NZHF) and the Hydrogen Production Business Model (HPBM)—by legislating the infrastructure required to distribute and store hydrogen at scale.

Together, these measures bridge the critical gap between hydrogen production and its commercial and industrial end use, supporting decarbonisation across transport, energy, and heavy industry.

Key provisions in the Energy Act 2023 relating to hydrogen

Revenue Support Contracts
The Act empowers the government to enter into long-term contracts with hydrogen pipeline and storage operators. These contracts provide revenue certainty, closing the financing gap and increasing investor confidence.

Levy-Based Funding Mechanism
The Act authorises the creation of a hydrogen levy, mirroring the funding structure used for renewable electricity. This enables public funding to flow to infrastructure projects critical to the hydrogen economy.

Regulated Asset Base (RAB) Model
It allows the Secretary of State to designate hydrogen transporters under the Gas Act 1986, enabling them to recover costs through regulated charges. This framework, commonly used for other utility sectors, incentivises private investment in large-scale infrastructure.

Support for Transport & Storage (T&S) Business Models
The legislation provides the statutory foundation for the UK’s hydrogen transport and storage business models, ensuring hydrogen produced under schemes like NZHF and HPBM can reach end-users in sectors such as industry, power generation, and transport.

Why this legal framework matters

Market integration: Hydrogen production cannot succeed in isolation. Efficient movement and storage across industrial clusters and regions is critical to scaling use.
Investor assurance: The combination of statutory revenue contracts, levies, and RAB licensing mechanisms provides legal clarity and predictability—vital to unlocking private capital.
Transport decarbonisation: Hydrogen infrastructure is essential for the rollout of fuel cell-powered vehicles, freight transport, public buses, trains, shipping, and aviation.

£500 million infrastructure investment - key objectives of the funding include:

Supporting large-scale hydrogen infrastructure, such as pipelines and storage caverns.
Decarbonising industrial processes, including refining and high-temperature manufacturing.
Providing long-duration energy storage for periods of peak energy demand.
Complementing and enabling ongoing hydrogen production initiatives—especially through successive Hydrogen Allocation Rounds (HAR). Notably, £2 billion was allocated under HAR1, with further rounds under way.

Economic impact and energy security

The hydrogen infrastructure investment is expected to:

Create thousands of skilled jobs in regions central to the UK's industrial base.
Enhance energy security by reducing reliance on international fossil fuel imports.
Attract additional private investment, building on the £400 million already committed in areas such as Milford Haven (Wales) and High Marnham (Nottinghamshire).

Industry stakeholders have widely welcomed the initiative, citing its significance for long-term energy resilience, green industrial growth, and the UK’s international competitiveness in clean technologies.

Conclusion

The Energy Act 2023, through its detailed legislative provisions and enabling powers, lays the legal foundation for a national hydrogen economy. As stated in our previous hydrogen updates, the UK Government had to take steps to reduce policy risk and implement clear legal and regulatory frameworks to give investors and businesses confidence that hydrogen is a government backed priority. The £500 million investment does just that, in that it represents not only a strategic deployment of public capital but also a strong signal to industry and investors.

With clear statutory frameworks now in place, the UK is positioned to lead in hydrogen deployment—delivering decarbonisation, energy security, and sustainable growth.

It is essential that the Government support this announcement by permitting quick deployments on a range of projects, from production size, business model and stakeholder perspectives.

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