Why the UK Is Investing in Green Hydrogen

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Green hydrogen has spent years appearing across UK strategy documents and trial programmes, with a long list of proposed developments alongside them. The position is beginning to change as the first government-backed commercial projects sign contracts and move towards construction. What was largely a discussion about future potential is becoming a programme of real industrial work.

Hydrogen should be judged against specific needs rather than presented as a replacement for every fossil fuel. Its strongest UK applications are likely to be industrial processes that cannot easily use electricity directly. Selected roles in long-duration energy storage and synthetic fuels strengthen that narrower case, because some of the most difficult emissions sit in those areas.

For ATLUS, the relevance lies in what happens as investment becomes physical infrastructure. Developers and equipment suppliers need engineering capacity, while manufacturers need coordinated information they can build from. The early projects will also establish practical knowledge that later UK facilities can use rather than relearn from the beginning.

What the plants do

A green hydrogen plant uses an electrolyser to split water into hydrogen and oxygen, with the electricity supplied from renewable sources. The resulting hydrogen is dried or otherwise conditioned to meet its intended use, then supplied directly to a nearby customer or prepared for storage and transport. Power conversion and water treatment support that central process alongside cooling and gas conditioning, but the purpose of the facility is straightforward: convert low-carbon electricity into a usable gas.

The word “green” is widely used, although UK policy is built around measured emissions rather than a colour label. The UK Low Carbon Hydrogen Standard sets a lifecycle method and an emissions threshold for hydrogen supported through government schemes. Renewable electricity therefore has to be evidenced, with the complete production route considered rather than the electrolyser viewed in isolation.

Hydrogen can carry energy to a place or process where electricity is difficult to use directly, and it can serve as a chemical feedstock in its own right. Those benefits come with conversion losses, so producing hydrogen only to perform a task that electricity could handle efficiently may offer little advantage. A useful project begins with a credible customer and a reason that hydrogen suits the application.

Where hydrogen matters

The UK's Climate Change Committee gives hydrogen a deliberately focused role. Its Seventh Carbon Budget describes hydrogen as a small but important part of the 2040 energy system, particularly for industrial activities such as ceramics and chemical production that may be difficult to electrify. It also identifies uses in dispatchable power and synthetic fuels, while expecting little or no role in building heat or most surface transport.

That assessment is more useful than broad claims about hydrogen powering everything. Direct electrification should remain the first option where it is practical, because it avoids the losses involved in producing and later using a separate fuel. Hydrogen earns its place where the alternatives are technically limited or where the molecule is required as part of the industrial process.

For the UK, domestic production could reduce reliance on imported fossil fuels in some industrial applications while creating another use for low-carbon generation. The best projects connect production with a defined local demand, limiting the need to move a low-density gas over long distances before transport networks are established. Industrial clusters and sites with an existing customer are therefore natural places for the first facilities to develop.

The importance of these plants lies partly in what they prove. Early facilities will establish real construction costs and show how electrolysers perform within British industrial operations. They will also expose where grid connections, equipment availability or the absence of transport and storage infrastructure restrict wider deployment.

A huge push

The first Hydrogen Allocation Round provided support for 11 green hydrogen projects with a combined capacity of about 125 MW. Government support includes £90 million in capital grants and more than £2 billion of revenue support over 15 years, intended to close part of the cost gap with conventional fuels. This support matters because first-of-a-kind plants face commercial risks that an established energy market has already absorbed.

In July 2025, 10 of those projects signed long-term contracts and were cleared to begin construction. Together, the projects are expected to bring in more than £400 million of private capital committed between 2024 and 2026, while supporting over 700 jobs. Their proposed customers include tissue manufacturers and distilleries, alongside waste operations and businesses using hydrogen for mobile equipment.

The next group is larger. The second Hydrogen Allocation Round shortlisted 27 electrolytic projects across England, Scotland and Wales in April 2025, creating a pipeline that government says could attract more than £1 billion of private investment by 2029. Shortlisting is not the same as a final investment decision, but it shows that developers are preparing projects beyond the first demonstration scale.

Production also needs a route to the user. In June 2025, the government announced more than £500 million for the UK's first regional hydrogen transport and storage network, intended to connect producers with industry and power generation. That commitment recognises a basic limitation: isolated plants can only grow so far without infrastructure linking supply to demand.

The engineering opportunity

Funding announcements are only the beginning. Before any hydrogen reaches a customer, each scheme must progress through site development, engineering, procurement and manufacture, creating work for the businesses able to turn specialist process requirements into equipment that can be built, installed and maintained. When that work is placed with UK engineering and manufacturing companies, the value of the investment spreads beyond hydrogen because the same experience applies across process plant, machinery, structural steelwork and industrial infrastructure.

ATLUS will be contributing to this work as projects move into delivery, taking responsibility for defined mechanical and structural packages within wider project teams. The scope will include equipment arrangements, support structures, industrial access systems and structural analysis, developed through to fabrication or installation drawings. Process engineering and specialist safety decisions will remain with the organisations appointed to lead them, keeping technical responsibilities clear throughout the project.

The opportunity follows the same logic discussed in The Return of UK Manufacturing: What Reshoring Really Requires. Domestic fabrication becomes viable when suppliers receive stable demand and production information that is complete enough to manufacture with confidence. Early hydrogen projects can provide both. As designs mature, the knowledge gained through module design, fabrication and installation can remain within UK businesses and be carried into later schemes, rather than being rebuilt for every project.

Green hydrogen will occupy a defined place in the UK energy system, although the engineering capability developed around it will have much wider value. A sustained programme of work would give domestic businesses greater reason to invest in skills and manufacturing capacity, while helping the supply chain develop repeatable ways of delivering complex industrial equipment. The benefit of the recent investment could therefore extend well beyond the first hydrogen plants, strengthening the UK’s ability to engineer and manufacture future industrial projects at home.