H2e notes that following the serious global impact on energy costs, the Government is now minded to restructure the UK electricity market in order to achieve its net zero objectives as outlined in its “Review of Electricity Market Arrangements” ("REMA") consultation published in July 2022.  H2e supports electricity market reform to encourage a step change uptake of electrolytic hydrogen production and puts forward the following ideas:-

  • Decoupling of domestic renewable energy production from the current UK wholesale electricity market where wholesale electricity prices are frequently set by gas-fired power generation to better regulate renewable electricity prices for consumers generally as well as commercially incentivize the fast deployment of commercial scale, low cost electrolytic hydrogen production.

  • Introduction of policies and incentives for: (i) utility owners/developers of large scale (CFD-participating) offshore windfarms (“Offshore Windfarm Owners”) to produce electrolytic hydrogen themselves; (ii) incentivize Offshore Windfarm Owners to directly supply (e.g. through private wire/behind the meter) certified green electricity to third party/non-utility owners/developers of electrolytic hydrogen; (iii) incentivize the uptake of long term bi-lateral green power purchase agreements (“PPAs”) between Offshore Windfarm Owners, green electricity supply businesses and non-utility owners/developers of electrolytic hydrogen with fixed price assurances linked to the CfD strike price; (iv) incentivise the co-deployment of large scale, long duration battery energy storage together with new build Offshore Windfarms to enhance electrolysis load factors and hence hydrogen production volumes. Incentives (ii) and (iii) are considered important to avoid the potential for monopolistic hydrogen pricing in the future.

  • Introduce exemption from non-commodity electricity charges for grid connected electrolytic hydrogen producers who can demonstrate that certified green electricity is being generated by nearby or regional onshore wind and solar PV farms, if the local distribution system is connected to both the hydrogen production hub and the relevant renewable generator(s).

  • Introduce capex subsidies payable to DNOs to perform grid reinforcement works where DNOs can satisfactorily demonstrate that such works are required specifically to facilitate electrolytic hydrogen production for local grid infrastructure (e.g. substations) which can be readily connected to both the hydrogen production hub and the relevant renewable generator(s).

  • Enable electrolytic hydrogen production to participate in any new demand side response incentive schemes being considered under REMA or through reform of the Capacity Market rules.


Enable electrolytic hydrogen production to realize other secondary revenues through participation in ancillary services markets including grid balancing and frequency response services.