CfD contract administrator wins similar role on hydrogen scheme

The Department for Energy Security and Net Zero (DESNZ) has announced that the Low Carbon Contracts Company (LCCC) will take on the management of new hydrogen production contracts.

The business model for hydrogen contracts is similar to the Contracts for Difference (CfD) scheme, where the subsidy is the difference between a strike price (reflecting the cost of producing hydrogen) and a reference price (reflecting the market value of hydrogen).

The LCCC has been advising government on the development of the business model for the past three years.

The company already acts in a similar role in administering the CfD scheme.

It means that the LCCC will soon be directed to offer contracts with the 11 hydrogen projects located across the UK, which were announced by the government in December.

LCCC chief executive Neil McDermott said: “We are delighted with the government’s announcement of 11 major hydrogen projects across the UK, which are to be offered Hydrogen Production Business Model contracts.

“This is an important development in the hydrogen sector and in our country’s journey towards net zero. We are excited to work with these new projects and expand our role in the development of the hydrogen economy.”

The 11 electrolysis projects announced in December are estimated to deliver 125MW of green hydrogen for businesses.

However, BP’s proposed HyGreen Teeside production facility, which was in the running for a contract through the government’s hydrogen allocation round, did not receive government approval.

This is significant as it ultimately led to the cancellation of the hydrogen village trial in Redcar, which the HyGreen project was due to supply.

Ministers also opened a second round of funding that companies can apply for to support their projects and published a production roadmap, which sets out the government’s plan for future allocation rounds in 2025 and 2026.

This includes plans to boost hydrogen capacity up to 1.5GW across these rounds, and award funding to projects to help deliver up to 4GW of CCUS-enabled, or blue, hydrogen and 6GW of green hydrogen by 2030.

Lead contract manager for hydrogen scheme development at LCCC, Oliver Coe, added: “This is fantastic news – we are looking forward to supporting the selected projects in 2024 and beyond.

“As things progress, the Hydrogen Production Business Model contracts will support the development and operation of a number of both Green and Blue Hydrogen Production Facilities in line with the UK’s net zero targets. We are excited by these steps and will continue to work with our partners to deliver positive outcomes.”