The UK has what it takes to secure a leading position in the global hydrogen market, according to the Hydrogen Energy Association’s (HEA) first annual ‘health check’ of the UK’s hydrogen economy, but there is work to do.
In its maiden State of the Hydrogen Nation report, HEA set out the findings of a survey of 142 organisations from across the UK’s hydrogen value chain, seeking to serve as a ‘practical tool for collaboration between government, regulators and industry – to help us move faster together’.
Key findings include that the UK’s regulatory framework for hydrogen is ‘strong and investable’ but policy and funding delays are at risk of impacting confidence. From the survey, 84% of respondents are anticipating their UK hydrogen investment to grow over the next 12 months, while just over half (51%) expect demand for hydrogen products and services to increase over the coming year.
There is a strong skills base that has been developed through the UK’s oil and gas, automotive, and chemicals industries. A hydrogen sector would offer a significant opportunity to create new jobs and support these workers through a just transition, with respondents predicting they could create as many as 17,000 jobs by 2030.
Delays to policy development and funding announcements are now hitting industry confidence in how committed to the UK government is to hydrogen – 49% feel the commitment has gotten ‘significantly or slightly weaker’ compared to 12 months ago. The UK is still among the top countries considered most attractive for hydrogen investment, however, at 30%, trailing on Germany (41%).
Demand creation is now proving to be the number one constraint on UK hydrogen market development, with 81% of organisations seeking offtakers reporting agreeing offtaker contracts is now somewhat or very difficult. Further barriers to integrating hydrogen into end-user operations including a lack of suitable infrastructure (71%), high or uncertain hydrogen supply costs (67%), lack of long-term policy incentives or support mechanisms (50%), competing low carbon energy operations (37%) and limited availability of hydrogen-compatible equipment or vehicles (29%).
Policy and regulatory certainty are considered the biggest barriers to growth right now – cited by 63% of organisations planning to increase investment. Others include customer demand uncertainty (56%), high capital costs and financing challenges (48%) and the cost of energy (27%). In terms of where they are planning to increase this investment – R&D and innovation (52%), workforce and skills training (43%), capital expenditure (38%) and international expansion (27%) were the most popular answers recorded.
To charge ahead and deal with some of the challenges facing the market right now, HEA recommends increasing the pace of delivery on upcoming policy and funding commitments, including HAR2, HAR3 and transport and storage allocation rounds; working with industry to accelerate the Clean Energy Jobs Plan and development of the Hydrogen and Carbon Capture Skills Accelerator; and sending clear signals of support for the UK hydrogen industry by creating more high-profile hydrogen ‘moments’ to regain momentum, developing an updated hydrogen roadmap and maintaining a focus on delivery against stated timelines, across and between departments.
To build demand, HEA suggests developing mechanisms that support long-term adoption by hydrogen end-users, especially focused on demand sectors identified in the updated Hydrogen Strategy, while implementing targeted measures to support HAR projects to take final investment decisions and accelerate the early development of the hydrogen economy. These include increasing flexibility in contracts and committing to a strategic role for blending into the gas distribution and transmission system.
Further recommendations include launching the Clean Industry Bonus for hydrogen in 2026, publishing an updated Hydrogen investment Roadmap, and for central government departments to work with Arm’s Length Bodies and devolved administrations to issue standardised and practical guidance to planning authorities, helping accelerate infrastructure delivery, as ways to address barriers and introduce enablers to the UK’s hydrogen economy.
