What is happening in the market?
The global hydrogen energy market is developing quickly, underpinned by the potential to support decarbonisation in transport, power and industrial applications. At the end of 2024, more than 1,500 hydrogen projects had been announced globally, with an estimated $680 billion of investment planned through to 2030, according to the J.P. Morgan 2024 Green Economy Outlook.
Domestically, Prime Minister Sir Keir Starmer MP has said “Some nation will be the first to harness hydrogen power. Why not Britain?”, and in the November 2024 Budget, Chancellor, Rachel Reeves, guaranteed £5.1 billion in funding for green hydrogen and CCUS projects – the first time any UK Government allocated resources to these sectors in the Red Book.
The new Government remains fully committed to its ambitious decarbonisation targets and sees investment and job creation in the low carbon economy as a core route to achieving its Growth Mission. The Labour manifesto also contains commitments to “rebuild supply chains at home” and growing manufacturing in net zero technologies. In this context, it is aiming to increase green hydrogen production to 10GW by 2030, up from the previous administration’s 6GW target, and increase levels of UK content used by hydrogen developers and offtakers.
The strategic choice made by the UK Government to resolve the ‘chicken and egg’ challenge of hydrogen is to first stimulate private investment in production of the molecule. This strategy is being delivered via the Net Zero Hydrogen Fund (NZHF) Strands 1 to 4 and Hydrogen Allocation Rounds (HAR), which are attracting global energy companies such as Trafigura, RWE, bp and Marubeni to develop projects in the UK due to the generous terms of the subsidy.
Several of the eleven HAR1 are expected to reach FID this year, with the first projects operational in 2026. The Government has also re-committed to publish the shortlist for HAR2 projects (which will total up to 875MW of capacity, up from 125MW in HAR1) soon. The Government have signalled HAR rounds 3-7 will be around 750MW each.
In January 2025, the Government demonstrated its long-term commitment to further annual Hydrogen Allocation Rounds across this decade by publishing a consultation on plans to fund the Hydrogen Production Business Model (HPBM) subsidy via a new levy on gas shippers. This is another critical part of building the framework for long-term development of the UK hydrogen market.
In Europe, the Alternative Fuels Infrastructure Regulation (AFIR) is seeking to accelerate the deployment of hydrogen refuelling networks for heavy-duty vehicles across the region and came into effect from April 2024. Member states are required to install refuelling stations at regular intervals by 2030.
Despite these positive developments, the hydrogen energy market has experienced slower-than-expected growth since 2020, in part due to supply chain constraints with electrolysers and gas compression systems and the uncertainty caused by cost inflation challenges that have impacted final investment decisions and the unit price of delivered hydrogen for consumers.
What does this mean for us?
CSC is well positioned to supply products and services to the growing hydrogen market, primarily in the UK and Europe.
The development of smaller localised hydrogen refuelling station infrastructure has slowed since 2020, driven by supply chain constraints, a limited supply of green hydrogen and lower than expected demand from the heavy-goods transport sector.
The shift to large-scale hydrogen production projects such as those now supported by the UK’s NZHF Strands 1 and 2 funding from February 2024 and more recent HAR funding programmes will seek to address green hydrogen supply issues in line with national clean energy targets.
Hydrogen production projects will require different types and sizes of pressurised storage and transportation system. CSC is in discussion with UK HAR1 and HAR2 developers where its Type 1 steel cylinders are required for static storage and road trailer applications and remains well positioned to secure projects in early 2025 for delivery later that year and into 2026 and 2027.
The first projects under HAR are likely to progress cautiously through 2025 and 2026, as developers take care with the implementation of new technologies and the integration of system components from a wide range of suppliers.
CSC hydrogen revenues are expected to be relatively flat through this period driven by the number of UK and European contracts opportunities. Once developers have proven concepts under HAR1, UK demand for storage systems and road trailers is expected to grow strongly from 2027 onwards.
Demand for hydrogen tube trailer periodic inspection, testing and recertification increased strongly during 2024, after steady growth in 2023. CSC continues to expand its customer base of gas majors and independent operators in this market, which has been supported by improved operational efficiencies and margins.
This area is expected to grow steadily during 2025 due to increasing demand for bulk hydrogen transportation, with CSC being one of very few suppliers of this specialised safety-critical service.
A major contract for large-scale storage under NZHF Strand 2 funding is expected in the first quarter of 2025 and a further major contract under HAR1 funding is expected in the second quarter of 2025. We are also bidding to supply storage systems for several European hydrogen refuelling station projects where an order is anticipated in the first quarter of 2025.
Over the longer term to 2050 and beyond, large-scale hydrogen transportation is expected to be predominantly by pipeline and some high-density bulk storage may move to liquefied hydrogen, but a demand for pressurised buffer storage and road trailer transportation is expected to remain.
While the demand for new pressurised storage and transportation systems may reduce as pipeline infrastructure expands, there will remain a strong market for CSC in the periodic inspection and testing of the installed fleets of cylinders, generating a repeat high-value revenue stream over the longer-term.
For more information on how we performed this year, see our latest Annual report.
