Designing the Net Zero Hydrogen Fund
Read the full outcome
Detail of outcome
Based on feedback and further policy development work, we have made some modifications to the Fund’s design to maximise its impact.
We propose to split the NZHF’s grant allocation into the following 4 strands:
- Strand 1: DEVEX (development expenditure) for FEED studies and post FEED costs
- Strand 2: CAPEX (capital expenditure) for projects that do not require revenue support through the hydrogen business model
- Strand 3: CAPEX for non-CCUS enabled projects that also require revenue support through the hydrogen business model
- Strand 4: CAPEX for CCUS-enabled projects that require revenue support through the hydrogen business model
The government response focuses on how we have incorporated this feedback into the final scheme design for strands 1 and 2, along with an overview of our approach to strands 3 and 4.
We have made the following key modifications to the Fund’s design for strand 1 and 2:
- hydrogen production projects will be able to apply for co-funding through strand 1 if they require support with DEVEX costs for FEED and post-FEED costs. Feasibility and pre-FEED will not be covered
- where appropriate, support will also be available for FEED and post-FEED costs for associated on-site transport and storage infrastructure
- to ensure the NZHF delivers a diverse and balance spread of projects, we intend to adopt a portfolio approach which will build in additional policy levers / controls to the project selection process
- strand 1 projects could receive up to 50% of their total eligible costs and strand 2 projects could receive up to 30%
Next steps
The competition briefs for Strand 1 (projects seeking DEVEX) and strand 2 (projects seeking NZHF capex co-funding alone) are available and applications are open from 25 April 2022. The application window for strand 1 has now closed and strand 2 will close on 13 July 2022. We have extended the strand 2 application window for an additional week.
Due to an error on the Innovation Funding Service (IFS) that is affecting certain user accounts, Innovate UK have made the decision to extend the competition deadline by 24 hours to 11am 23 June 2022.
If projects are looking to combine capital funding from the Net Zero Hydrogen Fund with revenue support from the Hydrogen Business Model, they will instead need to apply through the joint allocation round which we intend to open in summer. The market engagement exercise (see below) sets out more detail and seeks further input on this joint allocation round. We will open the first joint allocation round window in early July 2022.
CCUS-enabled projects applying for a hydrogen business model through Phase-2 of the CCUS cluster sequencing process will have an opportunity to apply for NZHF capital co-funding (strand 4).
We plan to launch a strand 4 NZHF ‘Expression of Interest’ process following the announcement of the Phase-2 shortlisted projects, followed by a strand 4 application process in early 2023.
Market engagement exercise
We also began a market engagement exercise on the proposed joint business model and Net Zero Hydrogen Fund allocation process for electrolytic projects.
The Hydrogen funding landscape infographic provides further information on funding opportunities.
Upcoming events
Our delivery partners are holding an online briefing event for potential applicants on Tuesday 26 April, 9.30-11.30am. It will focus on strands 1 and 2, development expenditure (DEVEX) and capital expenditure (CAPEX) support for projects that don’t need revenue support through the hydrogen business model. Find out more and register
BEIS is hosting an online event on Thursday, 21 April, 3-4pm, to provide an overview of the government responses to the consultation package. Register for the event.
Projects that wish to apply for revenue support through the Hydrogen Business Model, in addition to Net Zero Hydrogen Fund funding, will need to apply through the joint allocation round. We will hold 2 identical online workshops:
- Workshop 1, Thursday 21 April 2022: register your interest in attending by Tuesday 19 April 2022
- Workshop 2, Thursday 28 April 2022: register your interest in attending by Thursday 21 April 2022
You can also submit written responses.
We ask for basic information about your project and whether you’re interested in applying, to help us plan resourcing for the proposed upcoming allocation round. We reserve the right to limit attendance where workshops are oversubscribed.
Detail of feedback received
We received 105 responses to our consultation on the design of the Net Zero Hydrogen Fund.
57 were from organisations directly involved in a planned hydrogen production project and 48 from other organisations including:
- trade associations
- local government
- academics
- consulting firms
- non-governmental organisations
Our proposals for the final design of the fund were generally well received. Feedback showed broad agreement with many aspects of the proposed policy design framework, including the primary focus on using capital grants to de-risk projects and unlock private capital, targeted development support to stimulate the project pipeline, and a phased approach to get funding to projects as quickly as possible.
Original consultation
Consultation description
The Net Zero Hydrogen Fund (NZHF) will support at-scale deployment of low carbon hydrogen production during the 2020s.
We’re seeking views on how we design the Fund to maximise its benefits, while ensuring value for money. The consultation outlines our proposals for:
- the type of funding the NZHF will offer
- the technologies we seek to support
- activities covered by the fund
- eligibility and project assessment criteria
- the delivery of the fund
Those interested in responding to the consultation are likely to include:
- companies involved in the construction of low carbon hydrogen production projects
- companies that are looking for development support for low carbon hydrogen production projects
- interested members of the public
See the BEIS consultation privacy notice.
Please do not send responses by post to the department at the moment as we may not be able to access them.
Documents
Updates to this page
Last updated 8 April 2022 + show all updates
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Government response published, along with details of next steps and a number of forthcoming workshops.
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First published.