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Administrative timetable

Final report

11 September 2024: The SAU has published its report providing advice to DESNZ concerning the proposed NZHF CCUS Scheme. The report sets out the SAUs evaluation of DESNZs Assessment of Compliance of its proposed scheme with the requirements set out in the Subsidy Control Act 2022.

• Final report (11.9.24)

Request from DESNZ

30 July 2024: The SAU has accepted a request for a report providing advice to the DESNZ concerning its proposed NZHF CCUS Scheme. This request relates to a Subsidy Scheme of Particular Interest.

The SAU will prepare a report, which will provide an evaluation of DESNZ assessment of whether the scheme complies with the subsidy control requirements (Assessment of Compliance). The SAU will complete its report within 30 working days.

Information about the scheme provided by DESNZ

The NZHF comprises four strands and forms part of a suite of measures designed to support at-scale deployment of low carbon hydrogen production during the 2020s. This subsidy scheme is the NZHF strand 4 only. The scheme budget is up to 600 million.

The primary policy objective of the NZHF strand 4 is to: support the commercial deployment of new CCUS enabled low carbon hydrogen production projects through the provision of upfront capital grants, to assist with achieving governments aim to deploy up to 10GW of low carbon hydrogen production capacity by 2030 and help meet the UKs legally binding 2050 Net Zero target.

An additional policy objective of NZHF funding for strands linked to the Hydrogen Production Business Model (HPBM), which encompasses Strand 4, is to reduce the amount of ongoing revenue support projects require through the HPBM, achieving better value for money for government or potential future levy payers.

Strand 4 of the NZHF was designed to offer capital support through the NZHF for new build CCUS enabled low carbon hydrogen production projects which have applied for revenue support via the HPBM.

Only CCUS-enabled hydrogen projects which applied for the HPBM revenue support via the Track 1 Cluster Sequencing process were eligible to apply for strand 4 CAPEX support. Projects were able to apply for a CAPEX % of up to 20% of the eligible CAPEX costs associated with the construction costs of new CCUS enabled low carbon hydrogen production facilities. The grant funding intensity level was consulted on via a market engagement exercise launched by DESNZ from April to May 2022 and government considered the 20% maximum CAPEX % alongside HPBM support would enable CCUS projects to proceed.

In order to be eligible for the Track 1 application process, CCUS enabled low carbon hydrogen projects were required to meet the following criteria:

• the project must be located in the UK
• the project must have access to a carbon transport solution and storage solution
• the project must be operational no later than the end of December 2027
• the project must have commenced preliminary-Front End Engineering Design (pre-FEED) studies or be ready to commence pre-FEED no later than the end of December 2022
• be a new build CCUS-enabled hydrogen production plant
• have identified an offtaker or multiple offtakers

Successful CCUS enabled hydrogen projects in Track 1 may receive:

• capital grant support through this scheme, the NZHF strand 4, to help overcome the high upfront costs and risks associated with initial CCUS-enabled low carbon hydrogen production projects and lowers the financing cost of the HPBM

And also:

• ongoing contractual revenue support via the HPBM this is expected to provide price support through a variable premium model, with volume support provided indirectly via a sliding scale approach

Information for third parties

If you wish to comment on matters relevant to the SAUs evaluation of the Assessment of Compliance concerning DESNZs proposed NZHF CCUS Scheme, please send your comments before 5pm on the date stipulated in the timetable above. For guidance on representations relevant to the Assessment of Compliance, see the section on reporting period and transparency in the Operation of the subsidy control functions of the Subsidy Advice Unit.

Please send your submissions to us at: SAU-CCUS-NZHF@cma.gov.uk copying the public authority NZHFstrand4@energysecurity.gov.uk.

Please also provide a contact address and explain in what capacity you are making the submission (for example, as an individual or a representative of a business or organisation).

Notes to third parties wishing to make a submission

The SAU will only take your submission into account if it can be shared with DESNZ. The SAU will send a copy of your submission to DESNZ together with its report. This is to allow the public authority to take account of the submission in its decision as to whether to create or modify the scheme or its assessment. We therefore ask that you provide express consent for your full and unredacted submission to be shared. We also encourage you to share your submission directly with DESNZ using the email address provided above.

The SAU may use the information you provide in its published report. Therefore, you should indicate in your submission whether any specified parts of it are commercially confidential. If the SAU wishes to refer in its published report to material identified as confidential, it will contact you in advance.

For further details on confidentiality of third party submissions, see identifying confidential information in the Operation of the subsidy control

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