The government’s hydrogen strategy – a quick guide for businesses

The UK government published its highly anticipated Hydrogen Strategy this week, which sets out a roadmap for scaling up low carbon hydrogen production to meet net zero.

Here’s our brief guide to hydrogen: how, why, and where it will play an important role in decarbonising the UK economy.

Why hydrogen?

The government has identified hydrogen as one of a handful of new, low carbon solutions that will be critical for meeting the UK’s targets of net zero emissions by 2050 and cutting emissions by 78% by 2035 – a view shared by the Climate Change Committee which advises government.

As part of a renewable energy system, low carbon hydrogen could be a versatile replacement for high-carbon fuels used today – helping to bring down emissions in vital UK industrial sectors and providing flexible energy for power, heat and transport.

What is the government’s hydrogen goal?

The government wants to create 5GW of low carbon hydrogen production capacity by 2030. This could produce hydrogen equivalent to the amount of gas consumed by over 3 million households in the UK each year and would deliver total emissions savings of around 41MtCO2 e between 2023 and 2032, equivalent to the carbon captured by 700 million trees over the same time period.

Hydrogen can support the deep decarbonisation of the UK economy, particularly in ‘hard to electrify’ UK industrial sectors

What is hydrogen, and what’s the difference between ‘blue’ and ‘green’?

Hydrogen is a clean alternative to methane (natural gas), and it’s a very abundant element on our planet. It’s present in nearly all molecules in living things, but the challenge is that it’s very scarce as a gas. This means that if we are to use it as a fuel, it must be manufactured.

The most common production route is steam methane reformation, where natural gas is reacted with steam to form hydrogen. This is a carbon-intensive process, but one which the government says can be made low carbon through the addition of carbon capture, usage and storage (CCUS) – producing a gas often called ‘blue hydrogen’.

Hydrogen can also be produced through electrolysis, where electricity is used to split water into hydrogen and oxygen – gas from this process is often referred to as ‘green hydrogen’.

Today most hydrogen produced and used in the UK and globally is high carbon, coming from fossil fuels with no carbon capture; only a small fraction can be called low carbon. For hydrogen to play a part in our journey to net zero, all current and future production will need to be low carbon.

What’s the government’s approach to hydrogen?

The UK has committed to a ‘twin track’ approach to hydrogen production, supporting both electrolytic (“green”) and CCUS-enabled (“blue”) hydrogen, as it believes this is what is needed to deliver the level of hydrogen needed to meet net zero. Blue hydrogen is a contentious topic though – with one industry expert citing concerns that it will lock in our reliance on fossil fuels.

The Hydrogen Strategy outlines a range of policies and initiatives already underway, and other commitments which will be taken forward over the coming years to scale up production.

CCUS-enabled hydrogen production is currently cheaper than electrolytic hydrogen, but costs of the latter are expected to come down and could be cost competitive with CCUS-enabled by 2025.

What will hydrogen eventually replace?

Low carbon hydrogen is suited for use in a number of sectors where electrification is not feasible or is too costly, and other decarbonisation options are limited.

This includes its use in heavy industry – such as generating high temperature heat for furnaces, and to fuel long-distance and heavy-duty transport. It could also play an important part in heating buildings – particularly our homes, which are largely heated by natural gas.

It could also be useful in areas where the flexibility and stability of a gas is valued, for example large scale or long duration energy storage and flexible power generation.

What’s already happening?

There are several pioneering projects happening across the UK to drive forward the hydrogen agenda, and the Strategy showcases these. They include the development of hydrogen-powered buses by Wrightbus in Belfast, and a project by Hanson Cement in Port Talbot, exploring how hydrogen from renewable energy can help decarbonise cement manufacturing.

How can businesses get ahead with the hydrogen revolution?

The Strategy outlines a raft of measures that will accelerate the use of hydrogen across 4 main areas: power, industry, transport and buildings.

If your business operates within these sectors, you may be able to take advantage of grant funding that aims to develop hydrogen technology and support the business transition.

We’ve outlined the key pledges and funding opportunities below:

Industrial sector

  • Grant funding to support fuel switching technologies, including low carbon hydrogen, through Phase 2 of the £315m Industrial Energy Transformation Fund.
  • The launch of a new £55 million Industrial Fuel Switching 2 Competition later this year to develop and demonstrate innovative solutions for industry to switch to low carbon fuels such as hydrogen.
  • The launch of a new £40 million Red Diesel Replacement Competition to fund the development and demonstration of innovative technologies that enable Non-Road Mobile Machinery (NRMM) used for quarrying, mining, and construction to switch from red diesel to hydrogen or other low carbon fuels.
  • Support for research and innovation to support use of hydrogen in industry through the Net Zero Innovation Portfolio and initiatives led by the Industrial Decarbonisation Research & Innovation Centre.
  • A commitment to work with cluster projects to better understand the opportunities that pathfinder sites present, so to maximise the benefit to the sites themselves and the associated clusters.
  • By the end of this year the government will also launch a new Call for Evidence on ‘hydrogen-ready’ industrial equipment, and another Call for Evidence is planned to explore how to phase out carbon intensive hydrogen production.


  • Up to £120 million of funding this year through the Zero Emission Bus Regional Areas (ZEBRA) scheme towards 4,000 new zero emission buses, either hydrogen or battery electric, and infrastructure needed to support them.
  • Up to £20 million this year to design trials for both electric road system and hydrogen long haul heavy road vehicles (HGVs) and to run a battery electric trial to establish the feasibility, deliverability, costs and benefits of each technology.
  • Up to £20 million funding this year for the Clean Maritime Demonstration Competition, to accelerate the design and development of zero emission marine vessels in the UK.
  • Up to £15 million this year for the ‘Green Fuels, Green Skies’ competition to support the production of first-of-a-kind sustainable aviation fuel plants in the UK.
  • £3 million funding this year to support the development of a Hydrogen Transport Hub in Tees Valley, and £4.8 million (subject to business case) to support the development of a hydrogen hub in Holyhead, Wales.

Heat in buildings:

  • A pledge to deliver hydrogen for heat trials (neighbourhood by 2023, village by 2025 and potential pilot town by 2030), with a view to inform a 2026 “strategic decision point” on the future of hydrogen for heat.
  • A consultation is out later this year on the case for enabling, or requiring, new natural gas boilers to be easily convertible to use hydrogen (‘hydrogen-ready’) by 2026.
  • The government is also exploring the option of blending up to 20% hydrogen into the gas grid, with a decision to be taken in 2023 following testing of the safety, technical and economic case.


  • A pledge to engage with industry later this year on possible requirements for a research and innovation facility to support hydrogen use in industry and power.
  • A pledge to engage with industry to understand the economics and system impacts of introducing hydrogen into the power sector, including the impacts of sector coupling and utilising hydrogen energy storage.
  • A pledge to review progress on recent actions in the power sector, and to engage with relevant stakeholders and hydrogen projects early to ensure there is suitable support for hydrogen in the power sector.