Minister for Energy (): I am making this
statement to fulfil the commitment to inform Parliament via a
Written Ministerial Statement whenever the ambulatory reference
to the UK Low Carbon Hydrogen Standard (the Standard) in the
Hydrogen Production Revenue Support (Directions, Eligibility and
Counterparty) Regulations 2023 (“the Regulations”) is updated. A
new version of the standard (version 4) has now been published.
The Energy Act 2023 (“the Act”) makes provision for the
implementation of the Hydrogen Production Business Model (HPBM)
which is intended to provide revenue support to overcome the cost
gap between low carbon hydrogen and higher carbon counterfactual
fuels. The HPBM is designed to incentivise the production and use
of low carbon hydrogen, supporting the UK's net zero and energy
security ambitions.
Section 57(1) sets out the overarching power for the Secretary of
State to make regulations in relation to revenue support
contracts. There are a number of provisions in Chapter 1, Part 2
of the Act which set out the matters which regulations made under
section 57(1) may cover. The provision in section 66(5) of the
Act enables revenue support regulations determining the meaning
of “eligible” in relation to a low carbon hydrogen producer to
make ambulatory reference to published documents, including
standards, external to the regulations, i.e. as the documents
have effect from time to time. Given the nascency of the hydrogen
industry and the need for regulations underpinning the hydrogen
production revenue support contracts to provide sufficient
certainty to investors, the ability to make ambulatory reference
in regulations provides flexibility to help ensure the scheme is
in line with the latest technological developments to encourage
ongoing innovation and investment. This approach also aligns with
consultation feedback to ensure alignment with the UK
Government's definition of low carbon hydrogen when allocating
support to projects under the Hydrogen Production Business Model.
The Regulations were laid in draft in Parliament on 8 November
2023 and came into force on 20 December 2023. Bar certain
exceptions for low carbon hydrogen producers who applied for
financial support before the commencement date of the
Regulations, the Regulations determine whether a low carbon
hydrogen producer is “eligible” in relation to proposals it makes
for the production of hydrogen produced in accordance with the
Low Carbon Hydrogen Standard. The Regulations define “the low
carbon hydrogen standard” as the document published by the
Secretary of State in April 2023 entitled “UK Low Carbon Hydrogen
Standard - Version 2” or such standard as may be from time to
time published for the purposes of these Regulations by the
Secretary of State. The Regulations provide that where the
Secretary of State publishes a new or revised low carbon hydrogen
standard for the purposes of the Regulations, the publication of
the new or revised standard must include, or be accompanied by, a
statement in writing that it is published to replace the previous
version of the standard.
The Standard sets a maximum threshold for the amount of
greenhouse gas emissions allowed in the production process for
hydrogen to be considered ‘low carbon hydrogen'. It sets out the
methodology for calculating the emissions associated with
hydrogen production using production pathways in scope of the
standard, and the steps producers should take to prove that the
hydrogen they produce is compliant with the Standard.
On Monday 19 January, version 4 of the Standard was published and
focuses on ensuring that the requirements set out in the Standard
are clear and can be effectively applied under hydrogen
production revenue support contracts. This update reflects
lessons learned from the application of the LCHS to
the first Hydrogen Allocation Round (HAR1), stakeholder feedback
and evolving policy priorities to ensure that it remains fit for
purpose and keeps pace with the growing hydrogen economy.
Version 4 of the Standard replaces any previous versions of the
Standard for the purposes of the Regulations. This means that
currently version 4 of the Standard is the one that is to be used
for assessing eligibility under the Regulations, bar certain
exceptions as mentioned above.
