Removing the barriers to UK hydrogen deployment

On the regulatory and standards side, the UK has been developing and refining key frameworks such as the Low Carbon Hydrogen Standard and joint industry standards for hydrogen system safety and utilisation through bodies like IGEM.

At the project level, a growing pipeline has moved into advanced development or construction. Contracts have been signed under the Government’s Hydrogen Allocation Rounds (HAR) for multiple electrolytic hydrogen production projects across the UK, from Barrow and Bradford in England to Cromarty Hydrogen in Scotland, representing hundreds of megawatts of planned capacity and substantial private capital commitments. Alongside these, the H100 project in Fife will provide important real-world evidence on the technical feasibility and safety considerations of supplying 100% hydrogen to homes, helping to inform wider policy discussions.

While recent developments have built a strong foundation to further expand the role of hydrogen in decarbonising the UK gas industry, looking beyond the UK we can learn useful lessons on how to accelerate hydrogen rollout.

Learning from success

Germany and the Netherlands have identified hydrogen as a strategic tool for decarbonising hard-to-electrify sectors such as heavy industry, transport and energy system balancing. By prioritising these uses, rather than positioning hydrogen as a universal replacement fuel, both countries have been able to give industry the focused confidence needed to make the capital investment necessary to move projects beyond the pilot stage.

Crucially, this clarity has been matched by stronger demand-side signals and coordinated infrastructure planning. In Germany, hydrogen policy is closely aligned with industrial decarbonisation mechanisms, such as carbon contracts and sector-specific transition pathways, ensuring producers can see credible long-term offtake.

In the Netherlands, hydrogen development has been anchored around existing industrial clusters and ports, supported by early designation of a national hydrogen network operator and the repurposing of existing gas infrastructure for a 100% hydrogen backbone.

In both Germany and the Netherlands, hydrogen transport and storage are treated as strategic national assets, boosting energy security by helping to even out uncertain electrical supply caused by the growing proportion of renewable electrical generation connected to their energy systems.

These countries have adopted a pragmatic approach to regulation, enabling early deployment while standards and market frameworks continue to evolve. This willingness to remove regulatory barriers and “learn by doing” has accelerated progress significantly, resulting in a more investable hydrogen ecosystem, underpinned by whole-system thinking that links electricity, gas, industry and carbon management.

Necessary policy changes

Mirroring elements of this pragmatic approach would be welcomed by industry as the UK Hydrogen Strategy is updated . This is an opportunity to address four pressing policy questions delaying decarbonisation progress:

1. Blending

Hydrogen blending offers a pragmatic and near-term opportunity to reduce emissions from the existing gas system while wider hydrogen markets continue to develop. In 2023, Government signalled support for blending of up to 20% hydrogen by volume into Great Britain’s gas distribution networks, however, progress since then has slowed as the industry awaits the publication of the health and safety case for hydrogen blending.

From a Central Data Service Provider (CDSP) perspective, the evidence indicates that low-level hydrogen blending of up to 5% by volume represents a small-scale, low-risk step towards decarbonisation. Analysis from Xoserve’s Managing Different Gases programme shows that such blending could be delivered quickly and safely, with minimal impact on CDSP systems, and within existing network operations, data and billing frameworks. Importantly, it would do so at relatively low cost to consumers, while still delivering meaningful carbon reductions.

Prioritising these low-cost, quick-win opportunities would allow the UK to realise immediate carbon reductions and build momentum in the transition, without requiring fundamental changes to existing arrangements.

Looking further forward, higher levels of hydrogen blending of up to 20% introduces greater complexity; as system, data and regulatory changes would be required. If Government intends to pursue higher blends at scale, early clarity on the long-term vision, scale and timeline for gas system decarbonisation will be critical, enabling industry to plan efficiently, manage costs and maintain investor confidence.

Progress is continuing in the blending space as late last year, Centrica and National Gas completed a UK-first trial injecting a 2% blend of green hydrogen into the National Transmission System, which was then used to generate electricity at Centrica’s Brigg Power Station. The trial demonstrated that low-level hydrogen blending is technically and operationally viable across the UK energy system, from transmission through to flexible power generation.

2. Hydrogen’s role in a future energy system

Ofgem’s decision to exclude hydrogen investment from future strategic network innovation funding in RIIO-GD3 and the messages in the recent Warm Homes Plan are strong indicators that the UK Government envisions a specialised role for hydrogen in supporting hard-to-decarbonise industrial sectors. The updated Hydrogen Strategy is the opportunity to turn these signals into clearer policy direction, by setting out priority end uses while retaining flexibility as technologies, costs and system needs continue to evolve.

Clearly spelling out the UK Government’s vision for hydrogen’s role within the future energy system will provide further clarity and confidence to guide necessary investment in hydrogen production, transport and end-use infrastructure to decarbonise both the gas system and other parts of the UK economy. Once again, German and Dutch frameworks provide a useful model which could be readily adapted by the UK Government to accelerate progress and end the vicious cycle of ambiguity; with policy uncertainty delaying investment inspiring yet more policy uncertainty.

3. Targets

Further, the strategy has the opportunity to set ambitious but reasonable hydrogen production targets. The UK’s existing target of up to 10 GW of low-carbon hydrogen production by 2030, with at least half expected to be electrolytic, remains one of the most ambitious in Europe and has helped establish a solid early market.

Progress through the Government’s Hydrogen Allocation Rounds (HAR) has helped translate this ambition into delivery. Contracts under HAR1 have now been signed, providing revenue support to a first wave of electrolytic hydrogen projects, while HAR2 targets significantly greater capacity. However, with many projects still progressing through development and yet to reach final investment decisions, it is important that targets remain realistic. In parallel, a number of blue hydrogen projects continue to advance through planning, commercial structuring and early delivery stages, reflecting the potential role of multiple production routes in supporting scale-up.

Alongside production targets, clarity on transport and storage infrastructure will be critical. The UK has set an ambition for its first regional hydrogen network to become operational from 2031, supported by National Gas’s Project Union proposals to develop a core hydrogen backbone by repurposing existing gas infrastructure. Recent Ofgem approval of funding to progress key elements of Project Union into detailed engineering design marks an important step forward, helping to move hydrogen transport infrastructure from concept towards delivery. The continued development of hydrogen transport and storage business models, with first allocation rounds expected this year, will also be essential to crowd in private investment and enable coordinated infrastructure rollout.

Looking beyond 2030, analysis by NESO highlights the potential scale of future hydrogen demand. NESO’s Future Energy Scenarios indicate that hydrogen demand could reach up to 179 TWh by 2050 in some pathways, underlining the importance of ensuring that production ambition is aligned with credible signals on future end use across industry, power generation and system balancing.

Taken together, this points to the need for the updated Hydrogen Strategy to move beyond a single near-term milestone and instead set out a clear roadmap of targets into the 2030s and beyond, aligned with realistic demand growth. Providing this longer-term visibility would help guide investment decisions across production, transport, storage and end use, reduce the risk of misaligned infrastructure development, and support the efficient delivery of a low-cost, resilient hydrogen system.

4. Whole system thinking

Finally, progress will depend on effective whole-system planning across production, networks, storage and end use. NESO’s emerging suite of strategic plans, including the Strategic Spatial Energy Plan, Centralised Strategic Network Plan and Regional Energy Strategic Plans, will play a critical role in providing an integrated view of how hydrogen fits within the future energy system. Together, these plans are expected to set out coordinated pathways for infrastructure development over the coming years, helping to avoid siloed investment and ensuring hydrogen can be deployed where it delivers the greatest system value.

Seizing the opportunity

With a clear, consistent and ambitious policy framework, the UK has the opportunity to accelerate towards a net zero gas system, learning from our European neighbours to leapfrog their progress.

The essential ingredient of a successful UK Hydrogen Strategy is certainty: clarity for network operators to build necessary hydrogen infrastructure; confidence for investors to help drive down the costs of net zero; and certainty for end users and consumers to make the decision to go green.

The updated UK Hydrogen Strategy is a great opportunity for the UK to make rapid progress towards a decarbonised gas future.

Delivering this will depend on constructive collaboration across Government, regulators and industry, supported by robust, system-wide evidence. In this context, Xoserve’s role is to provide trusted data and insights that help inform decision-making across the sector, enabling a reliable gas system that can evolve to integrate hydrogen and biomethane alongside natural gas as the transition to net zero continues.

Get in touch

Learn more about hydrogen and the role it can play in decarbonising the gas grid on our dedicated hydrogen pillar page.

If you have any feedback or questions on any of the above, please email us at decarbonisation@xoserve.com.

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