Government's Hydrogen Supply Programme open for applications

Hydrogen supply value chain - flow diagram

The aim of the Hydrogen Supply Programme is to identify and test approaches to supplying bulk low carbon hydrogen; either to the gas grid, industry, power, transport, or import terminals. Low carbon hydrogen could play an important role in decarbonising the industry, power, heat and transport sectors. However, for a market to grow, potential users (in any application) need to be confident in supply of sufficient amounts of low carbon hydrogen at a competitive price.

By supporting innovative pilots to help develop the process and technologies required to supply bulk low carbon hydrogen, this programme seeks to address the cost differential between natural gas and low carbon hydrogen.

The programme will seek to identify and demonstrate bulk low carbon hydrogen supply solutions, which have the potential to be replicated at significant scale in identical or similar applications and that can meet the challenges of supplying the gas grid, industry, power and transport. The programme will also look into upgrading our import terminals to be able to handle hydrogen (or hydrogen carrier). The programme will be technology-neutral, however, it will take a portfolio approach to funding a range of solutions.

The proposed bulk low carbon hydrogen solutions include: low carbon production (through fossil fuel reformation with CCS), zero carbon production (using zero carbon energy such as electrolysis, nuclear, or biomass with CCS), the import infrastructure for hydrogen, the storage of hydrogen, or the bulk provision of hydrogen closer to the end user. These solutions could include the use of hydrogen carrier.

A two-stage Small Business Research Initiative (SBRI) pre-commercial procurement process will be used to deliver this competition:

Phase 1 - Feasibility studies

Total budget of up to £5 million, up to £500,000 contract for each study. This is broken down into four lots, described below:

Lot 1: Novel Low carbon production processes (£2 million, up to £500,000 per project)

Low carbon production methods are those based on separating out the hydrogen contained in fossil fuels with carbon capture and storage (CCS). The applications in this Lot will be compared to the counterfactual, which is steam methane reformation (SMR) process with CCS.

Lot 2: Novel 'Zero carbon' or carbon negative hydrogen production process (£2 million, up to £500,000 per project)

This lot includes, but is not limited to, hydrogen produced from a renewable source (including electrolysis, and biological with CCS), and high temperature processes (produced from a nuclear reactor). The applications in this lot will need to have the ability to produce hydrogen at the same rate as the Counterfactual on average over the year, and compare with the levelised costs (including the carbon saved). This could be either from one unit or a series of units.

If using a series, an explanation of how these units can work together to produce hydrogen in bulk, to an interface with the end user, will be required. To enable us to compare applications, applicants should assume that any electricity used to produce hydrogen has zero cost, however the applicant should specify the operation and potential electricity costs in their application. A carbon price of £93.40/tonne should be included when calculating the operating cost when compared to the counterfactual.

Lot 3: Novel import facilities (£0.5 million, up to £250,000 per project)

This Lot is aimed at innovations in converting the existing gas import terminals over to supplying hydrogen to the gas grid. It is required to supply Hydrogen at a greater rate as the counterfactual.

Lot 4: Novel interfaces and storage (£0.5 million, up to £250,000 per project)

This lot is aimed at innovations in the interfaces to supply the gas grid, industry, power and transport. Examples of these interfaces include novel methods to transport and store hydrogen at scale to a local storage depot (which in turn could supply hydrogen to a large number of refuelling stations7); and transporting hydrogen from offshore windfarms to the end user.

This lot is also aimed at innovations in hydrogen storage, either reducing the cost of storage, or inter-seasonal storage, such as repurposing abandoned gas fields. Any use of a hydrogen carrier, such as ammonia, would have to include the method for converting back to hydrogen.

Phase 2 - Pilot demonstration

Total budget of up to £15 million, up to £7.5 million contract for each demonstration project.

Phase 2 is for projects that have been down-selected from Phase 1, based on the information contained in their feasibility study. This phase will result in the implementation and demonstration of a hydrogen supply solution and will consider applications to pilot key components or further develop the design of the new hydrogen supply solutions.

A pilot demonstration is not limited to a physical demonstration and may only be for part(s) of the process. This could include detailed process modelling or engineering design. The Phase 2 demonstration projects will be selected based on the feasibility studies submitted for Phase 1 - no completely new applicants will be able to enter the competition at Phase 2, although some variation in project partners may be permitted.

The £20 million Hydrogen Supply programme aims to accelerate the development of low carbon bulk hydrogen supply solutions in the above sectors. It is aimed at projects at a technology readiness level (TRL) of 4 to 7, which could result in lower capital or operating costs when compared to steam methane reformer with carbon capture and storage (SMR+CCS), or improve the capture rates at a comparable cost.

All applications will have to meet the minimum assessment threshold (60%) to be funded. If the budget for a particular lot is not reached, the available funds will be shared with the other lots. Applicants may enter more than one lot and multiple bids, however their ability to deliver multiple projects will be assessed if applications are successful.

This competition is funded by the BEIS Energy Innovation Programme (2016-2021). The aim of this programme is to reduce the UK's carbon emissions and the cost of decarbonisation by accelerating the commercialisation of innovative clean energy technologies and processes into the mid-2020s and 2030s.

As part of the BEIS £505 million Energy Innovation portfolio, it has planned a £46 million suite of programmes on hydrogen.

This funding addresses three key challenges:

  1. To ensure hydrogen can be used safely in buildings.
  2. To support industry to explore how to switch to hydrogen (and other fuels), away from higher carbon fuels.
  3. To understand the potential role of power to gas for energy storage.

This complements wider activity by the government, including the Department for Transport's Hydrogen for Transport Programme2 and Ofgem's innovation funding exploring the use of hydrogen in distribution networks.

Applications to the programme are now open. If you are interested in applying, please see the guidance, application and finance forms on the BEIS website.

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