Scottish Power Halts Renewable Hydrogen Projects in the UK Amid Market Challenges
In a significant shift, British utility Scottish Power has announced a pause on its renewable hydrogen projects within the UK, despite having finalized subsidy agreements for two facilities in Scotland. The decision underscores the current difficulties faced in the green hydrogen sector, including challenging market conditions and a limited pathway to commercialization. The company emphasized its ongoing support for the technology, yet felt compelled to reassess its commitment amidst these obstacles.
Earlier this year, Scottish Power signed Contracts for Difference (CfD) for the 10 MW Cromarty project, developed in collaboration with Storegga, and the 7 MW Whitelee facility. These projects were selected for government subsidies in December 2023, marking them as key players in the UK's first hydrogen allocation round (HAR1). Under the CfD scheme, projects are guaranteed a fixed price for hydrogen sales, receiving the difference between this price and their fluctuating reference price—the higher of either the hydrogen sales price or the natural gas price.
The strike price established for the Whitelee project was set at £188.56 per MWh, equating to approximately £7.38 per kilogram of hydrogen, based on its lower heating value. The Cromarty project's agreement was settled at £214.27 per MWh. Despite these financial assurances, Scottish Power has not provided updates on other potential projects beyond preliminary feasibility studies.
In February, Shoreham Port in southeast England announced a partnership with Scottish Power to evaluate the development of a renewable hydrogen facility. Additionally, in March, Scottish Power obtained nearly £2 million to conduct a feasibility study for a 100 MW project at Felixstowe in Suffolk.
Out of the 11 projects selected in the HAR1 initiative, 10 have secured final CfD agreements so far. However, Scottish Power's decision to pause its projects marks a notable moment, as it is the first firm to take such a step, revealing the complex challenges that continue to plague the renewable hydrogen industry.
