Consultation outcome

Design of a business model for low carbon hydrogen

This was published under the 2019 to 2022 Johnson Conservative government
This consultation has concluded

Read the full outcome

Detail of outcome

The government response confirms our intention to proceed with:

  • a contractual, producer-focused business model, applicable to a range of hydrogen production pathways and able to facilitate hydrogen use in a broad range of sectors
  • a variable premium price support model where the subsidy is the difference between a ‘strike price’ reflecting the cost of producing hydrogen and a ‘reference price’ reflecting the market value of hydrogen
  • setting a reference price based on the producer’s achieved sales price, with a floor at the natural gas price, and a contractual mechanism to incentivise the producer to increase the sales price and thereby reduce the subsidy
  • providing volume support via a sliding scale in which the strike price (and therefore subsidy) is higher on a per unit basis if hydrogen offtake falls
  • allowing small-scale hydrogen transport and storage costs to be supported through the business model where necessary, taking into account affordability and value for money
  • introducing a levy to fund the business model from 2025 at the latest, subject to consultation and legislation, with the first electrolytic projects being funded through general taxation if they are operational before the levy is in force

We aim to finalise the hydrogen business model in 2022, and to allocate the first support contracts for projects reaching final investment decisions from 2023.

Indicative Heads of Terms

Alongside the government response we published high level, indicative Heads of Terms for the Low Carbon Hydrogen Agreement (the business model contract). This sets out further detail on key elements of business model design, including the payment mechanism.

Market engagement exercise

We also began a market engagement exercise on the proposed joint business model and Net Zero Hydrogen Fund allocation process for electrolytic projects.

The Hydrogen funding landscape infographic provides further information on funding opportunities.

Upcoming events

The Net Zero Hydrogen Fund opens Monday 25 April.

Our delivery partners are holding an online briefing event for potential applicants on Tuesday 26 April, 9.30-11.30am. It will focus on strands 1 and 2, development expenditure (DEVEX) and capital expenditure (CAPEX) support for projects that don’t need revenue support through the hydrogen business model. Find out more and register

BEIS is hosting an online event on Thursday, 21 April, 3-4pm, to provide an overview of the government responses to the consultation package. Register for the event.

Projects that wish to apply for revenue support through the Hydrogen Business Model, in addition to Net Zero Hydrogen Fund funding, will need to apply through the joint allocation round. We will hold 2 identical online workshops:

You can also submit written responses.

We ask for basic information about your project and whether you’re interested in applying, to help us plan resourcing for the proposed upcoming allocation round. We reserve the right to limit attendance where workshops are oversubscribed.

Detail of feedback received

We received 121 responses to this consultation, from a broad range of stakeholders across the UK, including:

  • business representative organisations and trade industry groups
  • businesses
  • academics
  • local government

Respondents broadly agreed with our proposals, and there was wide support for a contractual, producer-focused approach. The government response contains a summary of responses, based on an analysis of the common themes that emerged.

We liaised with the devolved administrations to ensure the business model works for all parts of the UK.

Original consultation


We're seeking views on the design for a low carbon hydrogen business model.

This consultation ran from

Consultation description

This consultation is seeking views on our preferred design of a low carbon hydrogen business model.

The government ambition is to deliver 5GW of low carbon hydrogen production capacity by 2030 as laid out in the December 2020 UK Energy White Paper.

We are seeking views from industry on the following:

  • our overall approach to business model design
  • our minded-to positions on the primary design features, namely price support and volume support
  • options for other design features of the business model

The consultation is open to all but we expect responses in particular from those with an interest in low carbon hydrogen, including:

  • project developers
  • financial investors
  • trade associations

Read the BEIS consultation privacy notice.

Please don’t send responses by post to the department at the moment as we may not be able to access them.


Updates to this page

Published 17 August 2021
Last updated 8 April 2022 + show all updates
  1. Government response and indicative Heads of Terms published, along with details of next steps and a number of forthcoming workshops.

  2. First published.

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