UK government awards GBP22 bil to Track 1 CCUS, blue hydrogen projects

The UK government has awarded GBP21.7 billion ($28.5 billion) in funding for carbon capture and low-carbon hydrogen projects under its Track 1 industrial cluster decarbonization program for HyNet in the northwest and the East Coast Cluster around Teesside in the northeast.

The funding for the projects will be available over 25 years, and marks a commercial agreement between the government and projects that had won support under Track 1, including EET Hydrogen’s 350-MW phase one CCS-enabled plant at the Stanlow complex, and BP’s 500-MW H2Teesside phase one project.

The projects will start from 2028, with capacity to remove over 8.5 million metric tons per year of CO2 emissions, the UK’s Department for Energy Security and Net Zero said in a statement Oct. 4.

“The nation now begins a new era of clean energy technology,” Prime Minister Keir Starmer said in the statement. “The UK has enough capacity to store 200 years' worth of emissions -- making CCUS a revolutionary method in tackling the climate crisis and helping industry to decarbonize.”

DESNZ said the funding would pave the way for the UK’s first large-scale hydrogen production plant, decarbonizing vital industrial sectors.

Successful Track 1 projects include two new blue hydrogen projects, a CO2 capture project for an existing hydrogen plant, CCS-enabled power generation and industrial decarbonization in waste and industry.

Project construction will start following positive final investment decisions and completion of statutory processes, DESNZ said.

The UK is targeting at least 4 GW of blue hydrogen production capacity in construction or operation by 2030, and a total of 10 GW of low-carbon production (including from renewables-powered electrolysis). It is also aiming for 20-30 MMt/y of CO2 capture and storage capacity by that date.

HyNet blue hydrogen

EET Hydrogen is set to become the first large-scale blue hydrogen plant to take a final investment decision in the UK.

EET Hydrogen CEO Joe Seifert said earlier in the year the company was targeting FID by the end of 2024, along with Eni’s FID on the CO2 transport and storage infrastructure.

Seifert told S&P Global Commodity Insights in March that there was plenty of demand for blue hydrogen at the price of natural gas, with initial offtakers including the Stanlow refinery, a combined heat and power plant in construction and the Encirq glass factory nearby.

Demand was “far in excess” of the capacity of the first Hydrogen Production Plant (HPP1), though customers for HPP2 would require a new hydrogen pipeline to be built for deliveries, he said.

Seifert said blue hydrogen at HyNet would cost a fraction of green hydrogen production supported under the government’s first electrolytic hydrogen allocation round (HAR1), which had a strike price of GBP241/MWh (around GBP9.50/kg, $12.45).

The UK Crown Estate has also awarded an “agreement for lease” to Eni to repurpose existing infrastructure to transport and store CO2, DESNZ said.

Platts, part of Commodity Insights, assessed the cost of producing hydrogen via alkaline electrolysis in the UK (including capex) at GBP6.12/kg Oct. 2, based on month-ahead grid power prices, while blue hydrogen production by autothermal reforming was GBP2.42/kg (including capex, CCS and carbon).

The UK government awarded funding to 11 successful electrolytic hydrogen projects in December under HAR1, totaling 125 MW, just half of the total capacity submitted, backed by more than GBP2 billion of revenue support from the Hydrogen Production Business Model.

The hydrogen business model provides revenue support to producers, making up the operating cost gap between low-carbon and higher-carbon fuels via 15-year private law contracts.

DESNZ did not provide details of the support mechanism for blue hydrogen production and CCS projects under Track 1.

East Coast Cluster

The projects that received Track 1 backing in the East Coast Cluster -- which spans Teesside and Humberside -- are all in Teesside: BP’s 1.2-GW H2Teesside blue hydrogen production plant, Net Zero Teesside Power -- a joint venture between BP and Equinor -- and BOC’s Teesside Hydrogen CO2 Capture

BP UK country head Louise Kingham said the company was now progressing its projects with partners.

“This announcement represents another step forward for the Northern Endurance Partnership and East Coast Cluster,” Kingham said in the statement.

However, the planning approval process for H2Teesside extends into 2025, and BP has not given an updated FID target date.

Future cluster plans

In December, the government announced plans to move to a competitive allocation process for CCS projects from 2027, and to open the HyNet CCS cluster to more companies from 2030.

It also awarded Track 2 status to the Acorn and Viking CCS cluster projects in 2023.

Environmental groups raised concerns that CCS projects were locking in fossil fuel use and jeopardizing the country’s climate targets.

However, Climate Change Committee Acting Chief Executive James Richardson welcomed the move.

“We can’t hit the country’s targets without CCUS so this commitment to it is very reassuring,” Richardson said in the statement.