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Net Zero Hydrogen Fund – Strand 2 – Capital expenditure (CAPEX)

Project Size:
Up to £90million

The aim of the Net Zero Hydrogen Fund (NZHF) is to provide capital expenditure (CAPEX) and development expenditure (DEVEX). This will support the commercial deployment of new low carbon hydrogen production projects during the 2020s.

This is to ensure the UK has a diverse and secure decarbonised energy system fit for meeting our ambition of 10GW low carbon hydrogen production by 2030, and commitment to reach net zero by 2050.

The NZHF will deliver up to £240m via four strands as follows:

Strand 1 : Development Expenditure (DEVEX) support for front end engineering design (FEED) studies and post-FEED studies, to grow the future pipeline of hydrogen projects in the UK.

Strand 2: Capital Expenditure (CAPEX) for projects that do not require a hydrogen specific business model. These are low carbon hydrogen projects that can deploy on the basis of capital expenditure support and are able to start construction rapidly.(This strand)

Strand 3: CAPEX for projects that require a hydrogen business model (HBM) and sit outside of the Phase 2 cluster sequencing process.

Strand 4: CAPEX for carbon capture usage and storage (CCUS) enabled projects that require a hydrogen specific business model and are part of the Phase 2 cluster sequencing process.

This competition relates to Strand 2 only.

Strand 1 is being delivered through a separate competition. Strands 3 and 4 will be delivered by BEIS. Projects which require support from a Hydrogen Business Model must apply to either Strand 3 or Strand 4, and not to Strand 2.

We recognise that some projects may be considering revenue support through both the Hydrogen Business Model and the Department for Transport’s Renewable Transport Fuel Obligation (RTFO) scheme. Subject to compliance with subsidy control principles, it is our intention to develop arrangements that could support dual participation in both schemes – although we would not look to allow projects to claim both sources of funding for the same volumes of hydrogen. We would envisage these projects applying for support through strand 3 (the joint NZHF-HBM allocation round), but further detail will be provided on this before the close of the strand 2 application window to allow projects to consider before finalising their arrangements. Applicants will need to satisfy themselves that they have applied to the appropriate strand for the requirements of their project.

Your proposal for strand 2 must demonstrate how you will develop a credible project that will contribute to the at-scale production of low carbon hydrogen by 2025. Funded projects must support the delivery of the 10GW production target by 2030 set out in the Energy Security Strategy UK Hydrogen Strategy.

Hydrogen production projects will be able to apply for co-funding through Strand 2 if they require CAPEX support to take a Final Investment Decision (FID) and begin deployment in the early 2020s.

Your total grant request must be between £200,000 and £30million.

Your project must:

  • have a total grant request of between £200,000 and £30million
  • start by 1 January 2023
  • end by 31 March 2025
  • last between 6 and 27 months
  • carry out all of its project work in the UK
  • intend to exploit the results from or in the UK
  • meet the Draft Low Carbon Hydrogen Standard
  • be using core technology that has been tested in a commercial environment, Technology Readiness Level (TRL) 7 or more

To lead a project or work alone your organisation must be a UK registered business of any size

Academic institutions, research and technology organisations (RTOs), public sector organisations or charities cannot lead or work alone.

To collaborate with the lead, your organisation must be one of the following UK registered:

  • business of any size
  • academic institution
  • charity
  • not for profit
  • public sector organisation
  • research and technology organisation (RTO)

Each partner organisation must be invited into the Innovation Funding Service by the lead to collaborate on a project. Once accepted, partners will be asked to login or to create an account and enter their own project costs into the Innovation Funding Service.

Your project can include partners that do not receive any of this competition’s funding, for example non-UK businesses. Their costs will count towards the total eligible project costs.

Subcontractors are allowed in this competition.

This competition will provide capital expenditure (CAPEX) to support low carbon projects to take a Final Investment Decision (FID) and begin deployment in the early 2020s. Your project must not require support from a hydrogen business model (these projects are covered in Strands 3 and 4 of the NZHF). This competition supports multiple hydrogen production pathways.

Your project must address low carbon hydrogen production opportunities and must focus on construction of new low carbon hydrogen production facilities.

We expect credible projects to utilise one of the following hydrogen production types:

  • electrolysis
  • methane reforming
  • gasification

We want to fund a portfolio of projects, across this competition, based on:

  • geographical location
  • project scale and replicability
  • project cost and funding available
  • project timescales
  • hydrogen production technology type
  • hydrogen production commercial readiness
  • alignment with and contribution to wider cross-economy decarbonisation
  • environmental impacts
  • use of additional low carbon electricity
  • affordability considerations, for example, longer term cost to the taxpayer
  • projects awarded funding through related BEIS and UKRI competitions
  • offtaker type

This will support the twin-track approach to hydrogen production as outlined in the UK Hydrogen Strategy.

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