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Net Zero Hydrogen Fund: Strand 2 Capital Expenditure Round 2

Project Size:
between £200,000 - £20million

This competition will support capital expenditure (CAPEX) costs for projects that do not require a hydrogen specific business model. The aim is to support low carbon hydrogen projects that can deploy on the basis of capital expenditure support and are able to start construction rapidly.

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 up to 10GW low carbon hydrogen production by 2030, and will help us reach our 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 production business model 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 (Round 2) only.

We recognise that some projects may be considering revenue support through both the Hydrogen production 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. Applicants will need to satisfy themselves that they have applied to the appropriate strand for the requirements of their project.

Your proposal for this strand 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 ambition by 2030 set out in the Energy Security Strategy.

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

It is the responsibility of the applicant to ensure that they are entering the appropriate competition strand for their project.

You will not be able to transfer your application between strands and it will not be sent for assessment if it is out of scope.

In applying to this competition, you are entering into a competitive process. This competition closes at 11am UK time on the deadline stated.

We reserve the right to cancel the competition and amend or vary the competition processes, including any envisaged stage and any document issued pursuant to it, at any point and for any reason.


Your project

Your project must:

  • have a total grant request of between £200,000 and £20 million
  • start by 1 November 2023
  • end by 31 March 2025
  • last between 6 and 17 months
  • carry out all of its project work in the UK
  • intend to exploit the results from or in the UK and be able to demonstrate relevant commercial engagement
  • be using core technology that has been tested in a commercial environment, Technology Readiness Level (TRL) 7 or more
  • meet the Low Carbon Hydrogen Standard Version 2 (LCHS v2)

The project timelines are fixed. Do not apply if you cannot complete your project work in the timeframes outlined above.

If your total grant funding request or CAPEX support falls outside our eligibility criteria, you must provide justification by email to at least 20 working days before the competition closes. We will decide whether to approve your request.

If you have not requested approval or your application has not been approved by us, you will be made ineligible and your application will not be sent for assessment.

Lead organisation

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

You will not be permitted to change your company structure or the lead organisation after you have submitted your application. Doing so may disqualify you from the competition.

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

More information on the different types of organisation can be found in our Funding rules.

Project team

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

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.

Non-funded partners

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 project costs.


Subcontractors are allowed in this competition.

Subcontractors can be from anywhere in the UK or overseas.

All subcontractor costs must be justified and appropriate to the total project costs.

Number of applications

In this strand a business can lead on up to 2 applications, which must be materially different, and can be included as a collaborator in a further 2 applications.

An academic institution or a research and technology organisation (RTO), charity, not for profit or public sector organisation can collaborate on any number of applications.

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 production business model as these projects are covered in Strands 3 and 4 of the Net Zero Hydrogen Fund (NZHF).

This competition supports the following hydrogen production pathways:

  • electrolysis
  • biomass or waste gasification

Your project’s eligible costs can include a request for support for:


  • the electrolyser system (the stack)
  • compressor costs integrated into main production facility, considered on a case-by-case basis
  • all necessary balance of plant including drier, cooling, de-oxo and water supply and de-ionisation equipment
  • civil works, for example building and foundations
  • on-site small-scale hydrogen storage costs, for example static storage units
  • electricity grid connection costs
  • planning applications and surveys, environmental permitting costs

Biomass or waste gasification:

  • feedstock storage
  • the gasifier
  • Syngas treatment unit
  • air separation unit
  • shift conversion unit
  • acid gas removal unit
  • sulphur recovery unit
  • CO2 drying & compression unit
  • methanator unit to convert residual carbon oxides
  • civil works
  • monitoring instrumentation and control systems
  • necessary balance of plant
  • on-site small-scale hydrogen storage costs, for example static storage units
  • electricity grid connection costs
  • planning applications and surveys, environmental permitting costs

We will not provide CAPEX for:

  • costs for electricity generation assets (wind farm, turbine acquisition or solar array)
  • compressor costs that are separate from the main production facility
  • costs of refuelling equipment and infrastructure
  • labour costs not associated with eligible costs listed above
  • pre-FID costs (feasibility studies, front-end engineering studies (FEED))
  • land value costs
  • hydrogen transportation costs
  • large long-term hydrogen storage costs

These lists are not exhaustive.

Please note: the funder will decide an eligible or ineligible cost on a case-by-case basis

Portfolio approach

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
  • additionality of electricity and wider system benefits

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

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