The UK government pledged on 9 December to provide support mechanisms and associated business models for the use of hydrogen in power generation to stimulate private investment.
In order to reduce the risk of hydrogen-to-power (H2P) investment and support deployment, the Department of Energy Security and Net Zero Emissions (DESNZ) has said it will introduce business models based on the Dispatchable Power Agreement (DPA) framework.
DPAs are already used for Carbon Capture, Utilisation and Storage (CCUS) in the power sector and are designed to incentivise private project finance. The government intends to adapt the mechanism to suit the needs of H2P.
The Government says: ‘Providing customised support and market intervention for H2P through the H2P business model will initially provide a route to market and our expectation is that as the technology develops, the supporting infrastructure matures and the cost of capital expenditure and finance reduces, H2P will be able to compete with other technologies and be deployed through a more competitive support process. ’
DESNZ plans to present a business model design in spring 2025, and in the meantime hopes to modify the capacity market to allow for the integration of H2P technology.
The capacity market mechanism is designed to balance the supply of electricity to the UK grid during periods of peak demand. Capacity suppliers commit to increasing or decreasing supply when needed. Suppliers are remunerated based on their availability and the amount of electricity they generate.
Currently, the government is seeking to enable power plant developers to build new plants or retrofit existing plants to incorporate hydrogen combustion or carbon capture technologies.