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ARTICLE · 20 FEBRUARY 2023

UK Hydrogen Production Business Model: An Update

Shepherd and Wedderburn
Shepherd and Wedderburn
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In the second of a series of articles, we set out some of the key implications of the Department of Business, Energy and Industrial Strategy (BEIS) update to the Heads of Terms for the Agreement for the Low Carbon Hydrogen Production Business Model (the LCHA), published in December 2022.

United KingdomGovernment, Public Sector
Ashley French
Ashley French
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In the second of a series of articles, we set out some of the key implications of the Department of Business, Energy and Industrial Strategy (BEIS) update to the Heads of Terms for the Agreement for the Low Carbon Hydrogen Production Business Model (the LCHA), published in December 2022.

Hydrogen Production Business Model

In a previous article, we considered the opportunities and challenges presented by hydrogen in the UK. To address some of those challenges, the Hydrogen Production Business Model (HPBM) seeks to support production of hydrogen via a contractual support mechanism which provides revenue support. In very simple terms, the mechanism recognises that the price at which hydrogen can be sold will not cover the costs of production and a reasonable return to investors. It, therefore, provides for "top-up" payments to account for this difference and provides investors with a measure of revenue certainty.

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