The Under-Secretary of State for Energy Security and Net Zero, my noble Friend Lord Callanan, has today made the following statement:
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 3—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 that set out the matters that 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 that producers should take to prove that the hydrogen they produce is compliant with the standard.
On 13 December 2023, in the period between the regulations being laid in draft and coming into force, version 3 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 and other future schemes. More consistent language is used in version 3 for indicating requirements of the standard, recommendations and permissible actions, and there has been restructuring and rationalisation of text for accuracy and conciseness. A key change to version 3 of the standard is to include “Gas Splitting Producing Solid Carbon” on the list of hydrogen production pathways that are within scope of the standard. At the time of publication, it was made clear that it was intended that version 3 of the standard would be the version for the purposes of the regulations when the regulations come into force.
The standard was republished on the 21 December 2023 to confirm that version 3 replaces any previous versions of the standard for the purposes of the regulations. This means that currently version 3 of the standard is the one that is to be used for assessing eligibility under the regulations, bar certain exceptions as mentioned above.
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