Hydrogen production business model
Updates on the hydrogen production business model, including the Low Carbon Hydrogen Agreement.
Documents
Details
The Hydrogen Production Business Model provides revenue support to hydrogen producers to overcome the operating cost gap between low carbon hydrogen and high carbon fuels. It has been designed to incentivise investment in low carbon hydrogen production and encourage users to switch to low carbon hydrogen by making it a price competitive decarbonisation option.
The business model is delivered through a private law contract (the Low Carbon Hydrogen Agreement) between a government appointed counterparty and a hydrogen producer.
The Low Carbon Hydrogen Agreement includes the following documents:
- Low Carbon Hydrogen Agreement: Standard Terms and Conditions
- Low Carbon Hydrogen Agreement: Front End Agreement
Low Carbon Hydrogen Agreement: key terms summary document with explanatory notes (Hydrogen Allocation Round 1 - December 2024)
This document provides a summary of the LCHA Standard Terms and Conditions for Hydrogen Allocation Round 1 (HAR1), including explanatory notes on the intention behind key terms. This document keeps the same content as the key terms summary document published in February 2025, with the addition of a column for each provision to explain its intention. It is provided for information only and does not constitute legal advice or alter the terms of the LCHA.
LCHA for HAR1 2024 (published February 2025)
These are the final versions of the Standard Terms and Conditions and the Front End Agreement template for HAR1. The Front End Agreement forms the front section of the LCHA and contains project-specific information that tailors the application of the Standard Terms and Conditions.
The completed contracts signed by individual HAR1 projects have been published by the LCHA counterparty, the Low Carbon Contracts Company, on their website.
The key terms summary document is intended to provide a summary of the LCHA terms applicable to HAR1 projects and strengthen understanding of the LCHA amongst wider interested stakeholders.
These documents provide details of the government’s design for a low carbon hydrogen business model.
LCHA Development 2023
The version of the Low Carbon Hydrogen Agreement published in August 2023 reflects the draft contract at that time.
We subsequently updated some provisions in the LCHA awarded to successful projects in Hydrogen Allocation Round 1, as published in February 2025.
LCHA Heads of Terms Development 2022
The Heads of Terms for the Low Carbon Hydrogen Agreement sets out the government’s proposed business model design in December 2022. We subsequently updated some of the policy proposals in the Low Carbon Hydrogen Agreement, as published in August 2023 and February 2025.
This set of documents includes:
- Low Carbon Hydrogen Production Business Model: Heads of Terms
- Low Carbon Hydrogen Production Business Model: Heads of Terms comparison with the indicative Heads of Terms (April 2022)
- Low Carbon Hydrogen Production Business Model: full contract drafting of the payment calculations
Consultation: design of a business model for low carbon hydrogen
Before the publication of the Low Carbon Hydrogen Agreement Heads of Terms in 2022, government undertook a consultation into the design of a business model for low carbon hydrogen. For further information see the design of a business model for low carbon hydrogen consultation documents.
Updates to this page
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Published Low Carbon Hydrogen Agreement: key terms summary document with explanatory notes (Hydrogen Allocation Round 1 - December 2024).
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Added updated versions of the LCHA Standard Terms and Conditions and Front End Agreement, and published the key terms summary document. These versions are applicable to HAR1 projects.
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Published the Low Carbon Hydrogen Agreement: Standard Terms and Conditions / Front End Agreement.
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Updated Heads of Terms document to include explanatory diagrams. Added a comparison of Heads of Terms docs (April and December 2022 versions), and full contract draft of the HPBM payment calculations.
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First published.