From NOT A LOT OF PEOPLE KNOW THAT
By Paul Homewood
I missed this announcement just before Xmas:
Following the launch of the first hydrogen allocation round (HAR1) in July 2022, we have selected the successful projects to be offered contracts. We are pleased to announce 11 successful projects, totalling 125MW capacity.
HAR1 puts the UK in a leading position internationally: this represents the largest number of commercial scale green hydrogen production projects announced at once anywhere in Europe. This round will provide over £2 billion of revenue support from the Hydrogen Production Business Model, which will start to be paid once projects become operational. Over £90 million from the Net Zero Hydrogen Fund has been allocated to support the construction of these projects.
We have conducted a robust allocation process to ensure only deliverable projects that represent value for money are awarded contracts. The 11 projects have been agreed at a weighted average [footnote 1] strike price of £241/MWh (£175/MWh in 2012 prices). This compares well to the strike prices of other nascent technologies such as floating offshore wind and tidal stream.
Government delivered HAR1 to time, and we expect that first projects will become operational from 2025. Combined with our commitments to further Hydrogen Allocation Rounds, this gives hydrogen developers, investors and supply chain companies the certainty they need to commit to the UK.
The CfD prices of £241/MWh compare to the current wholesale cost of natural gas at around £34/MWh.
The amount of hydrogen these projects will make is miniscule, about 1 TWh even if they work at 100% capacity. UK consumption of gas is over 800 TWh annually. £2 billion is a lot of money to pay out for so little, and presumably will be added to our gas bills, in the same way that subsidies for wind power are added to electricity bills.
What is interesting is that the strike prices will be flexed to changes in the market price of gas:
The schemes all appear to be electrolysers, and they all claim that only renewable electricity will be used, an absurd assumption! None of them say what they will do when there is not enough wind and solar power to meet demand – will they idle their plants, or will they carry on as usual taking whatever power the grid can supply?
How the DESNZ can claim it represents value for money is a mystery! And to pretend they are nascent technologies is also untrue, because electrolysis is a well established process.
But it’s our money they are spending, not their own, so why worry?
Above all though, this lifts the lid on just how horribly expensive green energy is. Remember too that the renewable power they claim they will use is already subsidised heavily. So £241/MWh understates the true cost.