UK projects £11 billion in investments to scale up hydrogen demand

The UK is gearing up for a major expansion of its hydrogen economy.

In its new publication, "Building Hydrogen Demand  An Action Plan, the Hydrogen Energy Association (HEA) sets out a roadmap with 15 key recommendations aimed at scaling up hydrogen use across industrial sectors, the energy system and transport.

The goal: to reach 10 GW of low-carbon hydrogen production capacity by 2030.

"It is time to shift focus towards scaling demand," the HEA states, warning that unless strategic decisions are made now, private investment will not flow quickly enough to consolidate the UK"s hydrogen economy.

Currently, fewer than 30 of the more than 100 hydrogen-related projects mapped in the UK involve end-use applications.

Hydrogen is indispensable for industrial decarbonisation, especially in hard-to-abate sectors such as steel, cement, glass, and petrochemicals.

The HEA estimates that up to 50 TWh of industrial demand could be met by low-carbon hydrogen by 2035.

Hydrogen also plays a strategic role in electricity generation.

The National Energy System Operator (NESO) estimates that the UK system will require 4045 GW of long-duration flexible capacity by 2030. "Hydrogen can deliver lower emissions at a lower cost than a power system without hydrogen," the HEA asserts.

According to its analysis, long-term energy storage using hydrogen could deliver savings of between £13 billion and £24 billion from 2030 to 2050.

Electrification alone will not suffice to decarbonise transport. The HEA projects that up to 45 TWh of transport demand could be met by hydrogen by 2035, particularly for heavy-duty applications such as lorries, buses, rail, maritime, and non-road mobile machinery.

"Current policy relies on disjointed grants and schemes without a long-term strategy," the HEA warns, calling for the urgent development of a Hydrogen for Transport Strategy.

Such a strategy should align infrastructure investment, vehicle deployment, and energy carriers like ammonia to enable scale-up across modes.

Hydrogen offers clear benefits where battery-electric technologies struggle: rural routes, high payloads, or rapid refuelling.

Trials show that hydrogen fuel cell vehicles could complete over 95% of fleet journeys, compared to under 50% for battery-electric vehicles (BEVs), particularly where overnight charging is not feasible.

Key barriers include the UK"s carbon pricing, currently just under £37 per tonne, which the HEA argues "fails to stimulate zero carbon solutions such as hydrogen.

The association recommends revising the carbon price to provide clearer investment signals.

Another pressing issue is the Climate Change Levy (CCL) applied to electricity used in green hydrogen production.

After industry pressure, including from the HEA, the government committed in March 2025 to exempt electricity used for electrolysis from the CCL, a move that could significantly improve the economics of green hydrogen.

The HEA advocates for greater flexibility in the Low Carbon Hydrogen Agreements (LCHAs) by enabling Risk-Taking Intermediaries (RTIs) to act as trusted offtakers linking producers and users. "RTIs could improve financial certainty across the value chain and enable joint ventures," the HEA notes, proposing that Great British Energy could serve in this role.

Additionally, the report calls for the creation of inland hydrogen hubs in areas outside of core industrial clusters.

These hubs would combine local production, diverse user profiles, and refuelling stations, supporting decentralised demand and reducing dependency on long-distance infrastructure.

This also supports the UK"s levelling up agenda by fostering regional economic growth.

Unlike the European Union, the UK does not currently have binding hydrogen use targets. In the EU, 42% of hydrogen used in industry must be renewable by 2030, with hydrogen refuelling stations mandated every 200 km.

These policy tools have triggered a surge in demand.

"Targets signal intent and can stimulate demand without fiscal cost," the HEA argues, suggesting a credit-based system where early adopters benefit and others can buy credits during their transition phase.

The HEA also calls for better alignment between the UK"s hydrogen schemes, particularly the Renewable Transport Fuel Obligation (RTFO), the Hydrogen Production Business Model (HPBM), and the Sustainable Aviation Fuel (SAF) mandate, which currently operate in silos.

Finally, the HEA highlights the need to simplify type approval processes, support pilot projects, and scale up smaller fleet adoption to build early momentum.

These steps, the report notes, are essential for hydrogen to reach critical mass and cost parity with diesel, currently estimated at around £8 per kilogram.

"This is the moment for strategic action and regulatory coherence," concludes the HEA, reinforcing that hydrogen is not just an emissions solution, but a major economic opportunity worth £11 billion in private investment and up to 12,000 jobs by 2030.