The economics of green hydrogen production remain complex. While previously, in the absence of implemented projects, there were optimistic forecasts about green hydrogen soon becoming competitive with grey hydrogen or natural gas, now that specific projects have been implemented, the number of such forecasts has decreased.

The UK government recently signed the first three contracts for difference (CfDs) under the Hydrogen Production Business Model program. Contracts for difference (CfDs), previously used to support renewable energy sources, are now extended to green hydrogen production. The CfD mechanism guarantees the producer a set contract price: if the wholesale price is higher than the contract price, the producer reimburses the difference to the government, and if the wholesale price is lower, the government reimburses the difference to the producer.

The contracts guarantee a guaranteed price of £9.49 ($11.9) per kilogram of green hydrogen produced over 15 years. The three projects supported by the contracts have a combined capacity of 31.8 MW.

Eight more contracts are expected to be signed early next year. According to LCCC, the government-owned company responsible for managing the CfD, the Hydrogen Production Business Model program provides long-term revenue support for hydrogen producers, reducing investment risks. The company noted that the contracts will help decarbonize a range of industries, support regional economic growth, and help the UK achieve carbon neutrality.