Hydrogen production business model
Updates on the hydrogen production business model, including the Low Carbon Hydrogen Agreement.
Documents
Details
Low Carbon Hydrogen Agreement - Hydrogen Allocation Round 1, December 2024 (published February 2025)
The Low Carbon Hydrogen Agreement was signed by the first projects supported by the Hydrogen Production Business Model in December 2024. The version of the Standard Terms and Conditions applicable to these projects is ‘Hydrogen Allocation Round 1 - December 2024’.
The generic ‘Front End Agreement’ has also been updated to reflect the version applicable to these projects. For more detail on individual projects, please see the government-appointed hydrogen production counterparty’s website.
The key terms summary document is intended to provide a summary of the LCHA terms applicable to HAR1 projects and strengthen understanding of the LCHA amongst wider interested stakeholders.
These documents provide details of the government’s design for a low carbon hydrogen business model.
Low Carbon Hydrogen Agreement (published August 2023)
The Low Carbon Hydrogen Agreement is the contract which underpins the hydrogen production business model. The version published in August 2023 reflects the draft contract at that time.
We have updated some provisions in the LCHA awarded to successful projects in Hydrogen Allocation Round 1, as published in February 2025.
The business model will provide revenue support to hydrogen producers to overcome the operating cost gap between low carbon hydrogen and high carbon fuels. It has been designed to incentivise investment in low carbon hydrogen production and use, and in doing so deliver the government’s ambition of up to 10GW of low carbon hydrogen production capacity by 2030.
The business model will be delivered through a private law contract (the Low Carbon Hydrogen Agreement) between a government appointed counterparty and a hydrogen producer.
The Low Carbon Hydrogen Agreement includes the following documents:
- Low Carbon Hydrogen Agreement: Standard Terms and Conditions
- Low Carbon Hydrogen Agreement: Front End Agreement
Heads of Terms for the Low Carbon Hydrogen Agreement (published December 2022)
The Heads of Terms for the Low Carbon Hydrogen Agreement sets out the government’s proposal for the final hydrogen production business model design. The Heads of Terms reflect the proposed business model design in December 2022. We have updated some of the policy proposals in the Low Carbon Hydrogen Agreement, published August 2023.
This set of documents includes:
- Low Carbon Hydrogen Production Business Model: Heads of Terms
- Low Carbon Hydrogen Production Business Model: full contract drafting of the payment calculations
- Low Carbon Hydrogen Production Business Model: Heads of Terms comparison with the indicative Heads of Terms (April 2022)
Consultation: design of a business model for low carbon hydrogen
For further information see the design of a business model for low carbon hydrogen consultation documents.
Updates to this page
Published 13 December 2022Last updated 12 February 2025 + show all updates
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Added updated versions of the LCHA Standard Terms and Conditions and Front End Agreement, and published the key terms summary document. These versions are applicable to HAR1 projects.
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Published the Low Carbon Hydrogen Agreement: Standard Terms and Conditions / Front End Agreement.
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Updated Heads of Terms document to include explanatory diagrams. Added a comparison of Heads of Terms docs (April and December 2022 versions), and full contract draft of the HPBM payment calculations.
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First published.