UK Urged to Shift Hydrogen Strategy from Production Targets to Demand-Led Approach
Experts call for focus on industrial clusters, fuel use and credible demand to underpin the UK’s hydrogen ambitions
The United Kingdom’s hydrogen rollout is facing mounting concern that production targets are outstripping real‐world demand, prompting industry and analysts to call for a “demand-led, systems-based” reset of the strategy.
Critics say that the existing focus on achieving a headline ambition of 10 gigawatts (GW) of low-carbon hydrogen by 2030 risks producing excess capacity with no clear consumer base.
Under the original plan launched in 2021, the UK aimed for 10 GW of hydrogen production by 2030, partly to supply 42 terawatt-hours (TWh) of hydrogen.
However, demand forecasts published shortly afterwards estimated maximum use of only 38 TWh by 2030, while the UK’s ammonia and refining industries—the major existing hydrogen users—have seen demand erode as key plants close.
The widening gap between planned production and viable demand raises questions about the efficiency of public funding and the replicability of hydrogenrollout models.
Additional issues include the cost of hydrogen production, where early contracts through the Hydrogen Allocation Rounds (HAR) were awarded at strike prices up to £241 per megawatt-hour, compared to government cost projections of £110/MWh.
Industry commentators say the UK government must rebalance its strategy by prioritising sectors where hydrogen is essential—such as industrial clusters, sustainable fuels and heavy transport—and not simply pursuing broad deployment.
They highlight that hydrogen’s role in domestic heat and surface transport is now far more limited, with mainstream electrification taking precedence.
Moreover, analysts emphasise the need for a strong integration of hydrogen infrastructure planning—production, transport, storage and end-use—and alignment with regional industrial plans and electricity-system design.
Without such coherence, the risk is that hydrogen may become a subsidised “fuel of last resort”, undermining investor confidence and value for money for taxpayers.
To strengthen the sector’s credibility, authorities are urged to refine the Low Carbon Hydrogen Standard, adopt measurement-based upstream methane accounting, loosen temporal constraints on electrolytic hydrogen production, and redesign funding mechanisms to support full value-chain projects and innovation from earlier technology readiness levels.
The upcoming Hydrogen Allocation Round 3 and a revised hydrogen strategy update are seen as opportunities to cement this recalibrated approach.
The message from hydrogen-sector watchers is clear: hydrogen remains a vital part of the UK’s journey to net zero, but success depends on aligning capacity with realistic demand, embedding hydrogen within industrial decarbonisation and systemic energy-planning frameworks, and ensuring public support for value-driven deployment rather than headline ambitions alone.
Critics say that the existing focus on achieving a headline ambition of 10 gigawatts (GW) of low-carbon hydrogen by 2030 risks producing excess capacity with no clear consumer base.
Under the original plan launched in 2021, the UK aimed for 10 GW of hydrogen production by 2030, partly to supply 42 terawatt-hours (TWh) of hydrogen.
However, demand forecasts published shortly afterwards estimated maximum use of only 38 TWh by 2030, while the UK’s ammonia and refining industries—the major existing hydrogen users—have seen demand erode as key plants close.
The widening gap between planned production and viable demand raises questions about the efficiency of public funding and the replicability of hydrogenrollout models.
Additional issues include the cost of hydrogen production, where early contracts through the Hydrogen Allocation Rounds (HAR) were awarded at strike prices up to £241 per megawatt-hour, compared to government cost projections of £110/MWh.
Industry commentators say the UK government must rebalance its strategy by prioritising sectors where hydrogen is essential—such as industrial clusters, sustainable fuels and heavy transport—and not simply pursuing broad deployment.
They highlight that hydrogen’s role in domestic heat and surface transport is now far more limited, with mainstream electrification taking precedence.
Moreover, analysts emphasise the need for a strong integration of hydrogen infrastructure planning—production, transport, storage and end-use—and alignment with regional industrial plans and electricity-system design.
Without such coherence, the risk is that hydrogen may become a subsidised “fuel of last resort”, undermining investor confidence and value for money for taxpayers.
To strengthen the sector’s credibility, authorities are urged to refine the Low Carbon Hydrogen Standard, adopt measurement-based upstream methane accounting, loosen temporal constraints on electrolytic hydrogen production, and redesign funding mechanisms to support full value-chain projects and innovation from earlier technology readiness levels.
The upcoming Hydrogen Allocation Round 3 and a revised hydrogen strategy update are seen as opportunities to cement this recalibrated approach.
The message from hydrogen-sector watchers is clear: hydrogen remains a vital part of the UK’s journey to net zero, but success depends on aligning capacity with realistic demand, embedding hydrogen within industrial decarbonisation and systemic energy-planning frameworks, and ensuring public support for value-driven deployment rather than headline ambitions alone.
