The UK has made a serious bet on hydrogen as a net zero cornerstone. But despite the policy announcements and revenue support mechanisms, bankable hydrogen projects are still few and far between on the ground.

The real question isn't whether hydrogen has a future, it's whether the frameworks we've got are actually structured to get projects financed and built.

The LCHA: Does it actually unlock financing?

The Low Carbon Hydrogen Agreement (LCHA), administered by the Low Carbon Contracts Company (LCCC) under the Energy Act 2023, is the government's main tool for de-risking green hydrogen production. It's modelled on the Contracts for Difference (CfD) mechanism that transformed offshore wind, offering producers a strike price against a reference price to provide revenue certainty over a contract term.

In theory, that's exactly what project finance lenders want. In practice, it's more complicated.

Volume risk, indexation mechanics and default triggers all need careful negotiation, and they're not resolved by the LCHA template alone. Lenders will want robust legal opinions on government obligations, regulatory change-in-law protections, and how the LCHA interacts with upstream power purchase agreements and downstream off-take arrangements. Add in the Low Carbon Hydrogen Standard (LCHS), which requires projects to demonstrate lifecycle emissions below 20g CO₂e/MJ to qualify for support, and you've got a meaningful compliance layer that needs managing through feedstock contracts and supply chain auditability provisions.

The LCHA is a starting point, not a finished product. Getting it to bankable requires significant legal work on every transaction.

Industrial decarbonisation: You can't assume the demand

Hydrogen's commercial case depends on industrial demand, and that demand isn't there yet at the scale the supply side needs.

Steel, chemicals and heavy manufacturing are the most-cited early adopters, and the logic stacks up: these sectors face the hardest decarbonisation challenges and growing regulatory pressure through the UK Emissions Trading Scheme. Substituting hydrogen in steelmaking, ammonia synthesis, and high-temperature industrial processes offers a real path to deep emissions cuts.

But there's a structural problem. Producers can't get financed without off-take agreements, and off-takers won't sign without confidence in price, volume and specification. Hydrogen Purchase Agreements (HPAs) are still relatively nascent instruments in the UK market, and drafting them well means navigating take-or-pay obligations, off-specification liabilities, gas-switching clauses, and change-of-law protections. It's an area where experience from LNG and energy commodities contracting genuinely translates.

The UK in global hydrogen trade: Ambition vs infrastructure reality

The UK has some real advantages in hydrogen trade. We've got a significant offshore wind resource, existing gas infrastructure, and proximity to European markets that are keen to reduce dependence on Russian gas. The ambition to become a significant producer and exporter is credible. But the infrastructure to back it up is still largely in the planning phase.

Transport and storage are being developed under a Regulated Asset Base (RAB) model and cap-and-floor revenue framework overseen by the Department for Energy Security and Net Zero (DESNZ), with the National Energy System Operator (NESO) playing a central role in strategic spatial planning through the Strategic Spatial Energy Plan (SSEP) and the Centralised Strategic Network Plan (CSNP).

For trade ambitions to translate into reality, consenting timelines need to accelerate. Large-scale hydrogen infrastructure will typically fall within the Nationally Significant Infrastructure Projects (NSIP) regime under the Planning Act 2008, requiring Development Consent Orders (DCOs), a process that can take several years for complex cross-boundary projects. Getting legal advisers involved early in the consenting and land access process isn't just sensible; it's essential. 

There's also broader momentum worth watching: the UK and EU have recently committed to linking their respective emissions trading systems, a move that's expected to strengthen the carbon price signal across both markets. For energy-intensive industries that are the primary target market for green hydrogen, a more stable and liquid carbon market only strengthens the case for switching.

What needs to happen

The policy architecture is largely in place. The gap between framework and financed projects is the problem. Closing it means greater standardisation of LCHA terms to bring down transaction costs, clearer demand-side signals to unlock industrial off-take, and faster infrastructure consenting to make the UK's trade position real.

Browne Jacobson's energy and infrastructure team works across the full project lifecycle, from development and consenting through to financing and operational contracting, supporting clients to structure hydrogen transactions that are legally robust, commercially viable, and bankable in the current market. If you'd like to talk through how we can help with your project, drop us a line.