Low carbon hydrogen will be vital to achieving net zero by 2050, with the potential to help decarbonise key UK industrial sectors and provide energy across power, transport and heat. After setting out an aim for 5GW of low carbon hydrogen production capacity by 2030 in the UK Hydrogen Strategy we are now doubling our ambition to up to 10GW by 2030, subject to affordability and value for money, with at least half The recent policy announcements on a Net Zero Hydrogen Fund to support deployment, a business model to ensure long-term revenue support, and a Low Carbon Hydrogen Standard to enable market access and certainty represent the next substantial step forward to developing a thriving UK We expect that up to 2GW of low carbon hydrogen production capacity will be in operation or construction by 2025, providing the necessary certainty to unlock over £9bn of private investment we want to see by 2030. 2Hydrogen Investor Leading the way to Net Zero

■ World’s most competitive capital allowances regime, including 130% super-deduction on plant and machinery ■ Generous R&D and patent tax reliefs ■ Lowest and most stable labour costs in Western Europe (compared to Germany, ■ The most business-friendly employment Agreement post EU exit allows zero tariff market access with the EU ■ Further UK Free Trade Agreements to turbocharge exports to the rest of the ■ Significant commercial advantage from leveraging UK’s legal system and The UK has one of the world’s most attractive 3Hydrogen Investor Leading the way to Net Zero

Opportunities in an advanced & ■Revenue Hydrogen Business Model focusing initially on electrolytic & CCUS-enabled hydrogen production ■Allocation commitment to allocate business model support in 2023 and 2024. Ambition to subsequently run yearly electrolytic allocation rounds ■Regulatory a new Low ■Existing natural assets and salt caverns, depleted oil & gas fields and gas pipeline infrastructure can be ■Projects under Over a dozen large-scale hydrogen projects ongoing or pending (e.g. Acorn, Gigastack, H21), two CCUS clusters ■Leading UK 196 companies ■Global UK consistently in top ten countries globally for hydrogen Hydrogen Investor Leading the way to Net Zero

Critical activities and milestones on a path to developing the UK hydrogen economy 100% hydrogen heating Design of Transport and Storage Industrial Decarbonisation & Hydrogen Revenue Support Scheme Hydrogen Investor Leading the way to Net Zero

Hydrogen will play crucial role in future Our ambition for up to 10GW of low carbon hydrogen production capacity by 2030 will help to create a thriving hydrogen economy in the UK. Analysis for UK Hydrogen Strategy shows that low carbon hydrogen will play a key role in UK energy system, becoming comparable in scale to existing electricity use by 2050. *Illustrative demand based on analysis for the UK Hydrogen Strategy (2021) Central range – illustrative net zero consistent scenarios in CB6 Impact Assessment. Full range – based on whole range from UK Hydrogen Strategy Analytical Annex. Final energy consumption from ECUK (2019). Hydrogen Investor Leading the way to Net Zero 6

Government and industry working together Providing certainty to the market What we are delivering What we look to industry to deliver Production ■ Supporting variety of production methods through innovation and deployment support – NZHF and hydrogen business model. ■ Progress research and innovation to bring forward a range of low carbon production technologies. Move towards Final Investment Decision on basis of support policies to help reach up to 10GW Use ■ Stimulating demand by supporting research, development and demonstration of hydrogen use across UK industry, power, heat and transport to support our energy transition. ■ Embrace fuels of the future and trial the use of hydrogen in manufacturing operations, power generation, domestic heating and a range of transport modes. Infrastructure ■ Supporting innovation in hydrogen infrastructure, and the development of network and storage facilities through the design of new business models for hydrogen transportation and storage (T&S) infrastructure that will provide the commercial framework ■ Explore and identify suitable infrastructure options for Funding support ■ Providing funding schemes to support early market development. ■ Develop low carbon hydrogen projects in response to Net Zero Hydrogen Fund and Hydrogen Business Model allocation rounds and lower costs of hydrogen production. Regulation ■ Using regulation to unlock access to energy markets and provide greater certainty on rules and frameworks. ■ Working with government and regulators to deliver a robust ■ Working with industry to build a world class supply chain for hydrogen in the UK, attracting investment and facilitating new export opportunities through UK Export Finance, DIT and FCDO overseas networks. Leveraging existing expertise and ensuring we have the right skills at the right time. ■ Support growth of the UK supply chain. Nurture and train employees to be the low carbon hydrogen leaders of tomorrow. Innovation ■ At least £100m of funding as part of the Net Zero Innovation Portfolio to support industry to switch to low carbon fuels, including hydrogen. Includes £60m Hydrogen Supply 2 to support innovative hydrogen production, transport and storage technologies. ■ Projects that accelerate the commercialisation of innovative, low carbon technologies and support government aims, such as reducing costs of hydrogen supply, increasing carbon saving potential, building knowledge and skills.
Hydrogen Investor Leading the way to Net Zero 7

Supporting multiple production methods Hydrogen Investor Leading the way to Net Zero 8 What we have done What we are doing What we committed to  The Hydrogen Strategy published in 2021 sets out our ‘twin track’ approach, supporting a variety of  Confirmed initial funding for hydrogen business model under the Industrial  Announced the first two CCUS cluster sites under phase 1 of sequencing  Hydrogen use in transport supported  Reducing financing costs with grant funding through the £240m Net Zero  Providing long-term certainty to investors through revenue support via  Identifying a potential UK pipeline of up to 20GW production capacity  Ambition for up to 2 GW capacity in operation or construction by 2025  Up to 10 GW production ambition by 2030, subject to affordability and  Aim for four CCUS clusters by 2030

Sample of potential hydrogen projects across the UK Hydrogen Investor Leading the way to Net Zero 9 Includes plans and proposals for projects that are in the public domain. Many more projects are under development in all parts of the UK. Total UK pipeline estimated up to 20GW as of April 2022. Location of projects on this map is approximate. 30. CCUS enabled hydrogen and green 37. ECC pipeline (Nat Grid Ventures) 38. Project Union (Nat Grid Gas) 3. BEIS & H100 Heat Trial 10. Cromarty Firth Green Hydrogen 19. Trafford Green /Carlton Power 20. Phase 2 & 3 pipeline (Cadent) 21. Salt Cavern Storage (INOVYN) Electrolytic end use (indicative)

What we have done What we are doing What we committed to Transformation Fund for equipment  Following a Call for Evidence, exploring whether to enable or require hydrogen-ready industrial boilers, which could be a significant source of early demand for low carbon hydrogen  Working with cluster projects to better understand the opportunities for industrial sites to foster an initial market for low carbon hydrogen  Published a Call for Evidence in 2021 on Decarbonisation Readiness for combustion power plants through either  Publishing a Decarbonisation Readiness Consultation in Summer 2022. Actioning Net Zero Strategy commitment to explore the need and case for further market intervention on  Assessing potential for hydrogen in the future power system through providing generation as new renewables are completed critical technical innovation work on potential of domestic H2. HSE overseeing trials assessing the impacts of hydrogen blending on consumer  Working with industry and others to deliver a neighbourhood trial by 2023, a village scale trial by 2025 and a potential hydrogen heated town by  Government is aiming to make a decision on blending by end of 2023 and plans to take decisions in 2026 on the role of hydrogen in heating in Tees Valley in 2021, delivering pilot technologies across all transport modes  £23m HydrogenTransport Programme delivering new hydrogen refuelling stations, upgrading existing stations  Continuing multi-million pound support for transport decarbonisation, including deployment, trials & demonstration of hydrogen buses, HGVs, shipping, aviation and multi-modal transport Making the case for use of hydrogen Simultaneously stimulating demand Hydrogen Investor Leading the way to Net Zero 10

What we have done What we are doing What we committed to ■ Set out in government responses in 2022, early development of T&S infrastructure for initial H2 production projects supported by business model &  Currently undertaking a review into requirements in 2020s and beyond, including need for economic regulation & funding, with update provided for in H2 Business Model government response ■ Significant development of new H2 storage infrastructure to support the growth of H2 economy through the design of new business models for transportation and storage by 2025  Since 2002, the Iron Main Risk Reduction Program replacing iron gas distribution networks with plastic, which is well-suited  Industry has undertaken a series of projec ts to build the evidence base for using pipelines to transport H2 as part of H21  To support network transition, industry will test transporting hydrogen through the gas network as part of  Industry exploring the potential for a transporting hydrogen between the clusters as part of Project Union  Parts of existing gas network could be used to transport H2 and we plan on engaging stakeholders on the future of  Working with industry to deliver H2 heating trials including a neighbourhood trial by 2023, a village scale trial by 2025 & a potential hydrogen heated town by 2030, resulting in building a new network for the neighbourhood trial and repurposing the existing network for ■ In 2021, we launched a £60m Hydrogen Supply 2 competition to support range of demonstration projects, including H2 ■ In 2021, we launched a £68m Longer Duration Energy Storage Demonstration  Industry developing plans for one of the world's largest H2 storge facilities at Aldbrough on the East Yorkshire coast ■ Working with industry to deliver hydrogen heating trials, resulting in the assessment of storage needs for a working hydrogen heating system Connecting hydrogen production and uses Enabling infrastructure for the hydrogen value chain Hydrogen Investor Leading the way to Net Zero 11

What we have done What we are doing What we committed to ■ Publication of consultation on Fund ■ Split funding into four strands to align timelines, enabling projects to apply 1. DEVEX grant co-funding to support 2. CAPEX grant co-funding for projects that do not require IDHRS support 3. CAPEX grant co-funding for non- CCUS projects that are seeking 4.
CAPEX grant co-funding for CCUS- enabled projects that are seeking  Using grants to de-risk projects and  Targeted Development Expenditure (DEVEX) support to stimulate project  Phased approach to get funding to projects as quickly as possible  Complement and maximise the impact of other BEIS innovations – notably  Stimulating new build low carbon ■ Up to £240 million, delivered between 2022 - 2025, to support new H2 ■ CAPEX grant funding to be delivered in tandem with a long-term revenue settlement provided through IDHRS ■ Open funding windows to our first two ■ Allocate funding for electrolytic projects via the hydrogen business model and NZHF strand 3 in 2023 Stimulating investments in the hydrogen economy Hydrogen Investor Leading the way to Net Zero 12 *Net Zero Hydrogen Fund & Industrial Decarbonisation and Hydrogen Revenue Support (IDHRS)  Enable commercial deployment of low carbon hydrogen, CCUS and the required infrastructure in  Deliver sufficient capacity to meet our legally binding carbon budgets and net zero  Create a framework to reduce costs and risks to have a cost-competitive and self-sustaining market

What we have done What we are doing What we committed to ■ Publication of government response on business model design, alongside indicative Heads of Terms of the ■ Launch of process to allocate funding to production projects through CCUS Revenue Support scheme (IDHRS) to  Developing detailed model design to provide producers with revenue support and help overcome operating cost gap between hydrogen and fossil  Designing an allocation round for electrolytic hydrogen projects and engaging industry through a Market Engagement exercise, with the aim of launching the round in summer 2022  Selecting the first CCUS-enabled hydrogen projects to enter into bilateral negotiations with through the CCUS ■ Finalise the business model in 2022 ■ Support up to 1GW of electrolytic hydrogen projects in operation or construction via initial two allocations ■ Announce funding envelope in 2022 to support delivery of up to 1GW of ■ Ambition to run yearly electrolytic allocation rounds for the hydrogen business model and to move to price- competitive allocations as soon as market conditions and legislation allow ■ Set out in the government response on the H2 Business Model design, that early development of transportation and storage infrastructure for initial H2 production projects can be covered  Undertaking a review of systemic H2 networks and storage requirements in 2020 and beyond, including economic ■ Design new business models for H2 tr ansportation and storage infrastructure Stimulating investments in the hydrogen economy Hydrogen Investor Leading the way to Net Zero 13 Other sources of financing available Industrial Energy Transformation Fund Breakthrough Energy CatalystUK Infrastructure Bank UK Export Finance

What we have done What we are doing What we committed to ■ Published the final design of the low  The consultation sought views on design options for a UK standard defining 'low carbon' hydrogen, to underpin our support for hydrogen emissions threshold for ‘low carbon’ hydrogen and the methodology for  Consulting on potentially including the standard under the Green Taxonomy, to support investment in low carbon ■ Levelling the playing field by setting up a hydrogen certification scheme by 2025, so the UK can play an active role in the international hydrogen  Taking full advantage of future global trade and investment opportunities by ensuring the standard is developed in line with international developments  Established a Hydrogen Regulators Forum to determine current and future responsibilities across the hydrogen  Working to identify, prioritise and implement any changes to the existing non-economic regulatory framework – including addressing any gaps – to support the growth of a hydrogen  Addressing regulatory barriers facing first-of-a-kind H2 projects. Using regulation to unlock access to new markets. Ensuring role for H2 is considered in broader reviews of Hydrogen Investor Leading the way to Net Zero 14

What we have done What we are doing What we committed to electrochemical technologies, including fuel cells and electrolysers, which UK companies are exporting overseas and our functional strengths in planning, legal, professional and financial  Government working to promote growth of UK supply chains to meet hydrogen deployment ambitions.  UK Export Finance providing enhanced support for investment into developing ■ Supporting UK expertise in high-end manufacturing, oil & gas, renewables, Skills ■ Published the Green Jobs Taskforce report and established a Green Jobs Delivery Group with representatives from industry, the skills sector and other key stakeholders to support the development and delivery of the Government’s plans for green jobs  Working with industry and others to ensure investment in skills needed across the value chain and drive local and regional opportunities, helping to level-up across our industrial  Continue to deliver relevant green T- levels, apprenticeships and skills ■ North Sea Transition Deal includes a commitment to facilitate the reskilling of existing parts of the oil and gas workforce to ensure people and skills are transferable across the wider ■ Government has supported the development of innovative low carbon hydrogen technologies, providing over £90m in direct R&I funding across the supply chain in the last 5 years. Hydrogen is a key priority area in our £1bn Net Zero Innovation Portfolio  The UK co-leads the Clean Hydrogen Mission, with the goal of reducing end- to-end costs to $2 per kilogram by  Programme of key research and innovation challenges across all net zero sectors over the next 5-10 years, collaboration with UKRI, including World class UK supply chains, skills and innovation Hydrogen Investor Leading the way to Net Zero 15

Hydrogen Investment Case Study – ITM, Ørsted, Phillips 66, Element Substantial private investment in ITM supported (incl. £250m fundraise) >100 direct jobs created (projected further 180 in supply chain & could Hydrogen Investor Leading the way to Net Zero 16  Secured £7.5m innovation funding geared to commercialisation, from forerunner of NZIP. Multiyear support for the sizeable Gigastack demo project, profile from HMG award. In same period, ITM moved into new Gigafactory site.
 Project helped refine technology and scale-up production, including via semi-automated processes. ITM says “milestones represent a step-change in ambition and capacity which should enable a 40% reduction in costs for electrolyser stacks over the  ITM used innovation project learning to improve processes and as part of their showcase for investors. They raised £250m in Oct 21 to build two more Gigafactories.  At year end, ITM had a record order backlog (~500MW), and a sizable tender pipeline (~1GW).  NZIP continues with a commercialisation focus and backs demos of sufficient scale to interest investors, with competed-for funding

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