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Three green hydrogen projects drop out of first UK
production subsidy round ahead of negotiations
16
August 2023
By Polly Martin
A computer-generated image of the proposed
Gigastack hydrogen production facility.Photo: Gigastack
The government plans to award operational
support to 250MW by end of year, but 262MW is still in the running
The UK government has today (Wednesday) announced
that 17 green hydrogen projects will move forward to the negotiations
stage of the first allocation round for the so-called Hydrogen
Business Model (HBM) subsidy, to be awarded in Q4 this year.
This means that three projects — the Commercial
Scale Demonstrator led by ERM Dolphyn, Gigastack led by Phillips
66 and Ørsted, and Quill 2 led by Inovyn ChlorVinyls — representing a
combined 146MW have withdrawn during the due diligence stage.
While little information has been released about
Quill 2 based at the Inovyn site in Runcorn, both Gigastack and the
Dolphyn demonstrator project aimed to use offshore wind to produce
green hydrogen.
Gigastack was set to use a 100MW electrolyser supplied by ITM, with
electricity supplied by Hornsea 2 offshore wind farm, in order to
supply renewable hydrogen to the Phillips 66 Humber refinery.
A spokesperson for Phillips 66 and Ørsted confirmed to Hydrogen
Insight that the project has been paused.
“Phillips 66 Limited and Ørsted believe that further project
maturation together with supply chain development is required to
unlock the maximum potential of this world-scale electrolytic hydrogen
project,” the spokesperson added.
“We will continue to work with the governments of the UK, industry and
stakeholders to help realise the enormous potential of green
hydrogen.”
Meanwhile, ERM Dolphyn planned to construct 10MW
of electrolysis capacity integrated with a floating offshore wind
platform and desalination unit.
The developer has clarified in a statement that it withdrew from the
competition in order to increase the capacity of its first deployment
and would thereby need other sources of funding.
Similarly, a spokesperson for Inovyn tells Hydrogen Insight that while
Quill 2 remains “a high value strategic project that will deliver a
large-scale electrolysis plant... having developed the project
programme based on real-world lead times, it is clear that Quill does
not align with the timescales required by HAR1 as these are based on
smaller scale investments”.
However, the company has not confirmed whether it plans to submit the
project for future funding rounds.
The HBM effectively provides a subsidy during operations via a private
law contract with the government that covers the difference between a
“strike price” reflecting the cost of producing green hydrogen and a
“reference price” for the market value of grey H2.
In March, the government announced that 20 projects representing 408MW
had been shortlisted for the support scheme — but only 250MW would be
funded for this round, which seeks to back projects that can start
operations in 2025.
The remaining 17 projects (listed below) have a
combined capacity of 262MW:
However, the government has called for the three
projects that dropped out of the competition to apply for support in
its second HBM allocation round (HAR2), due to open at the end of this
year.
HAR2 aims to award contracts to up to 750MW of capacity in early 2025,
in a bid to guarantee the targeted 1GW of green hydrogen plants by
that year are at least under construction.
The government announced earlier this month that it will hold annual
tenders to support hydrogen projects.
Updated to include comment from Gigastack developers Phillips 66 and
Ørsted and Quill 2 developer Inovyn.(Copyright)
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