Notice

Strand 1 clarification questions (updated 19 May 2023)

Updated 27 February 2024

General

Will this be the last funding round for strand 1 and 2 within the existing budget or are there plans to run future rounds next year? (added 12 May 2023)

The Net Zero Hydrogen Fund (NZHF), announced in the Ten Point Plan, is worth up to £240 million and will be delivered between 2022 and 2025.

We do not at present have plans for a further application round for strands 1 and 2.

I have a question about this competition or would like to check if we’re within scope or eligible. Who can I speak with? (added 12 May 2023)

You can get in touch with the Innovate UK customer support service by:

• email: [email protected]
• phone: 0300 321 4357

Phone lines are open from 9am to 12:30pm and 1:30pm to 5pm, Monday to Friday (excluding bank holidays).

Innovate UK receive a high number of calls and emails closer to the competition close date. Please allow sufficient time to complete your application.

How can we find partners to work with on our project? (added 12 May 2023)

As part of the NZHF, we are not running any networking events. We’re expecting applications to be near market, and to have project partners in place as a result.

Summary

What is the definition of hydrogen production at scale - what volume of hydrogen counts as ‘at scale’ and is this from a single location or distributed across multiple locations? (added 12 May 2023)

Strand 1 does not have a size limit on the production, but you are expected to be using core technology that has been tested in a commercial environment, Technology Readiness Level (TRL) 7 or more. NZHF is designed to support hydrogen production projects that will meaningfully contribute to our up to 10GW ambition.

Each application is for a hydrogen production facility at a single location. A business can lead on up to 2 applications, which must be materially different, and can be included as a collaborator in a further 2 applications.

If FEED is being conducted in phases, is it possible to apply to NZHF Round 2 for the first phase of FEED and then apply to further rounds of NZHF for the second phase of FEED for the same project? (added 12 May 2023)

No, it is our intention that a project will only be able to receive development support for FEED and post-FEED costs from the NZHF strand 1 once.

It is understood that a Strand 1 bid can be made for FEED study support for a project that may subsequently make a strand 3 bid for HBPM support, is this correct? (added 12 May 2023)

Yes, applicants can bid into the NZHF strand 1 and would still be eligible to apply for further support the hydrogen allocation round 2 (HAR2) or the cluster sequencing process depending on the needs of their projects.

Should FEED applications be completed by 31st March 2025 with a project capable of production by 2030? (added 12 May 2023)

FEED studies need to be completed by 31 March 2025 to deliver a credible timeline for hydrogen production. Depending on the complexity of your project, an earlier date than 2030 might be deliverable.

Can projects applying for Strand 1 DEVEX during this current application window (closing on 31 May 2023) also apply for Strand 3 CAPEX when the next application opens? (added 12 May 2023)

Strand 1 of the NZHF aims to grow the pipeline of projects in the UK by providing development support for FEED and post-FEED studies, and we expect that projects supported through strand 1 will go on to apply for NZHF CAPEX and/or HBM support in future allocation rounds.

As such, applicants will need to consider whether their project is able to progress without strand 1 development funding, prior to bidding into strand 3.

Where can I get more information about the different NZHF strands? (added 12 May 2023)

You can find more information on various NZHF funding strands, as well as other hydrogen funding streams from the Department for Energy Security and Net Zero here:

• Designing the Net Zero Hydrogen Fund
• Hydrogen net zero investment roadmap
• Hydrogen Production Business Model / Net Zero Hydrogen Fund
• Cluster sequencing Phase-2

Is it a requirement that hydrogen production must be operating by 2025? (added 12 May 2023)

No. The requirement is to be delivering hydrogen by 2030 latest. Your proposal for strand 1 must demonstrate how you will develop a credible project that will contribute to the at-scale production of low carbon hydrogen by 2030.

Can the same project apply for strand 1 and strand 2 at the same time? (added 12 May 2023)

No. Strand 1 aims to grow the future of hydrogen projects in the UK through supporting front end engineering design (FEED) and post-FEED studies.

Strand 2 is for low carbon hydrogen projects that can deploy on the basis of capital expenditure support and are able to start construction rapidly. Strand 2 projects do not require a hydrogen specific business model.

Scope

Would a project producing hydrogen using a plasma electrolyser be eligible for support from the NZHF strand 1? (added 12 May 2023)

No. Thermal Plasma Electrolysis (TPE) is not a listed production pathway in the Low Carbon Hydrogen Standard (LCHS) version 2 and is therefore not supported by the NZHF strand 1 competition.

Would methanol to hydrogen or hydrogen from electrochemical production pathways be eligible for this competition? (added 12 May 2023)

It is unlikely that methanol to hydrogen or hydrogen from electrochemical production pathways would be eligible due to the emissions associated with creating the feedstock (methanol or other electrochemical feedstocks). Please contact us with the details of your proposal for further clarification.

Would DEVEX for electrolytic hydrogen production be in scope for a project that plans to use the hydrogen produced for e-methanol synthesis? (added 12 May 2023)

Yes. Electrolysis is one of the hydrogen production pathways supported by this competition.

Can DEVEX from this competition be used to fund the production of a hydrogen derived product, such as e-methanol? (added 12 May 2023)

No - the Net Zero Hydrogen Fund is for low carbon hydrogen production only, so any costs for producing a hydrogen derived product such as e-methanol would be ineligible.

Would the C02 capture and treatment a project carries out as part of e-methanol synthesis using hydrogen in scope for funding? (added 19 May 2023)

The C02 capture and treatment proposed is part of the e-methanol value chain and is not part the electrolytic hydrogen production process. The fund supports the production of low carbon hydrogen only and therefore the treatment and capture of this C02 would not be eligible for funding under the NZHF Strand 1 competition.

Are other hydrogen pathways, such as thermochemical production eligible? (added 12 May 2023)

Hydrogen production from biogenic feedstocks using thermochemical conversion processes are one of the hydrogen production pathways supported by this competition.

Could the fund support DEVEX costs for pre-FEED work under Strand 1? (added 12 May 2023)

No. This competition will support FEED and post-FEED studies only.

Would the fund support FEED studies for hydrogen production from novel heat sources (e.g. Advanced Nuclear Technologies)? (added 12 May 2023)

Electrolysis using nuclear electricity is a hydrogen production pathway supported by this competition, as listed in the Low Carbon Hydrogen Standard Version 2.

Would strand 1 cover investigations into the environmental impacts of hydrogen energy production and evidence-led research on sustainable hydrogen value chains for the UK? (added 12 May 2023)

Your project must address low carbon hydrogen production opportunities. This competition supports DEVEX costs for FEED and post-FEED studies. FEED studies can include environmental impacts and mitigation.

Please see the ‘Scope’ section of the competition to see a more detailed breakdown of what FEED and post-FEED studies can include.

If work starts earlier than 1 November 2023 will the grant cover amounts spent in advance? (added 12 May 2023)

Expenditure incurred after the date you have received a notification letter on successfully passing the technical assessment but before you sign a GOL may potentially count towards your total capital costs, subject to the consent of the Secretary of State and compliance with subsidy control rules. However, until your GOL is signed any such spend would be entirely at your own risk. We cannot fund any costs incurred before the date you submit your application form.

Is the NZHF for developing or trialling hydrogen vehicles? (added 12 May 2023)

No, the NZHF is only available for low carbon hydrogen production.

Can land option fees for access to the site for FEED work be included? (added 19 May 2023)

No, these costs are not eligible for DEVEX support from this competition. Post-FEED and pre-final investment decision studies can include planning applications.

Where land agreements haven’t been finalised is there scope to include review of alternative sites?

Any costs associated with a review of alternative sites would not be eligible for DEVEX support from this competition.

Eligibility

Will bunkering of efuels (utilising green hydrogen) to shipping which is transiting UK waters be treated as export? (added 12 May 2023)

A hydrogen production facility that produces hydrogen and then converts this to green ammonia to be used as a fuel in shipping would be eligible for support under strands 1 and 2 of the NZHF.

Would bunkering of e-Methanol into ships at a British Port for both domestic and international travelling vessels be eligible? (added 12 May 2023)

Yes - a hydrogen production facility that produces hydrogen and then converts this into e-methanol to be used as a fuel in shipping would be eligible for support under strand 1 of the NZHF. Only the costs associated with the hydrogen production facility would be eligible costs.

Is the fund suitable for hydrogen production when the production will be used on the same industrial site by the same hydrogen producer (i.e. not sold to an ‘offtaker’)? (added 12 May 2023)

A project producing hydrogen where the production will be used on the same industrial site by the same hydrogen producer would be eligible for support from this competition.

We would expect evidence of the use and necessity of the hydrogen they produce, and the burden of proof will depend on whether the project is applying for strand 1 or 2, as detailed in the respective competition brief.

What is the funding rate for large businesses? (added 12 May 2023)

For development expenditure (DEVEX) support you could get funding of up to 50% of your eligible project costs if you are a UK registered business of any size.

Can Local Authorities apply? (added 12 May 2023)

They cannot apply alone but they can collaborate on a project with a UK registered business acting as the project lead. Academic institutions, research and technology organisations (RTOs), public sector organisations or charities cannot lead a project or work alone.

Can academic research groups participate in this? (added 12 May 2023)

Academic research groups can collaborate with the lead organisation but cannot lead or work alone.

Can a subcontractor be in more than one application with different lead organisations? (added 12 May 2023)

A subcontractor can collaborate on any number of applications.

Can costs of developing renewable energy (solar / wind) to power hydrogen production and obtaining planning permission be included as part of the FEED element? (added 12 May 2023)

No, the NZHF only covers the costs associated with the hydrogen production facility and not for the generation of renewable electricity.

Costs are provided for FEED, post-FEED studies or both. Please see the ‘Scope’ section of the competition to see a more detailed breakdown of what FEED and post-FEED studies can include.

Are Hydrogen Refuelling Stations eligible under this scheme this year? (added 12 May 2023)

No. The Net Zero Hydrogen Fund is for low carbon hydrogen production only.

Will there be limits to the number of applications a company can make? (added 12 May 2023)

Yes - a business can lead on up to 2 applications, which must be materially different, and can be included as a collaborator in a further 2 applications.

What is required by 2025 for Strand 1 projects - are projects to take FID or projects to be operational? (added 12 May 2023)

A project must carry out all of its project work by 31 March 2025 i.e. complete FEED and/or post-feed studies funded by Strand 1 DEVEX support. The requirement is to be delivering hydrogen by 2030 latest.

Can projects that have previously unsuccessfully applied for NZHF funding apply again? (added 12 May 2023)

Yes - you can use a previously submitted application to apply for this competition. You must amend your application based on the updated scope and questions for this competition.

Are projects required to have secured a site for a project, or would having an option on land suffice? (added 12 May 2023)

A secured site is not essential at the proposal stage but a credible option on the land should be in place to ensure that a site-specific FEED study can be undertaken.

What activities could equate to the project starting by 1 November 2023? For example, would all contracts with consultancies need to be in place for the FEED project by this date? (added 12 May 2023)

Contracts would not need to be final at this point, although you would need to be clear that the contracts can be placed in a timely manner to avoid impacts on the project delivery timescales.

Should FEED studies be completed by 31st March 2025 with a project capable of production by 2030? (added 12 May 2023)

FEED studies need to be completed by 31 March 2025 and to deliver a credible timeline for hydrogen production. Depending on the complexity of your project, an earlier date than 2030 might be deliverable.

What exactly is meant by the start date/end date? Specifically for Strand 1, does start date mean the start of construction and therefore the end date mean operation? Or does it mean the project FID must be made prior to March 31st 2025? (added 12 May 2023)

FEED and/or post-FEED studies funded by Strand 1 DEVEX support must be completed by March 2025. The requirement is to be delivering hydrogen by 2030 latest.

Can a Joint Venture (JV) company apply and be the lead applicant, if the owners of the JV company are also applying into this strand with other projects as lead applicants? (added 12 May 2023)

A JV could lead on up to 2 applications, which must be materially different, and then its parent(s) could lead on a further 2 and collaborate on a further 2.

The company is funded by both public (local authority) and private sector investors, can you please confirm how the company applying for the funding is funded itself (public and private investors) would restrict or prohibit the company being eligible to receive funding? (added 12 May 2023)

A company funded by both public and private sector investors could be eligible to receive funding. However, to lead a project or work alone your organisation must be a UK registered business.

What happens if the application is successful but one of the partner organisations decides to not proceed with the grant offer? (added 12 May 2023)

Funding is awarded on the basis of the project and any changes to the ownership/leadership of the project would be at our discretion.

We have team members inside IR35 long term contractors via umbrella companies. Show should they be accounted for in our Finance? (added 12 May 2023)

IR35 contractors should be included as a subcontractor. You will be unable to claim overheads for these members.

Will work done before 1 November 2023 be eligible for funding? (added 12 May 2023)

Expenditure incurred after the date you have received a notification letter on successfully passing the technical assessment but before you sign a Grant Offer Letter (GOL) may potentially count towards your total capital costs, subject to the consent of the Secretary of State and compliance with subsidy control rules. However, until your GOL is signed, any such spend would be entirely at your own risk. We cannot fund any costs incurred before the date you submit your application form.

We may require an overseas subcontractor. Will we still be eligible? (added 12 May 2023)

Project grant holders must carry out work in the UK but can subcontract overseas if needed.

You will need to provide justification within your application and ensure the value is appropriate to the total project costs.

For further information, read the eligibility section of the competition brief.

We believe we are eligible for the NZHF Strand 1, but we’re a start up without any trading history. Can we still apply? (added 12 May 2023)

Yes, you can still apply. As a start-up, you will need to provide evidence of funds available to start the project from yourselves or investors by sharing your bank statement and/or a letter of comfort if this will be a third-party investment.

We are a micro company. How much can we claim? (added 12 May 2023)

For developmental expenditure (DEVEX) support, you could get funding of up to 50% of your eligible project costs if you are a UK registered business of any size.

We are an academic organisation. How much can we claim? (added 12 May 2023)

For developmental expenditure (DEVEX) support, you could get funding of up to 80% of full economic costs (FEC) if you are a Je-S registered institution such as an academic. Please note, this can only make up to 30% of the project total eligible cost, and you cannot be project lead.

We are an RTO, charity, not for profit organisation, public sector organisation or research organisation. How much can we claim? (added 12 May 2023)

For developmental expenditure (DEVEX) support, you could get funding of up to 100% of your eligible project costs if you are an RTO, charity, not for profit organisation, public sector organisation or research organisation. Please note, this can only make up to 30% of the project total eligible cost, and you cannot be project lead.

An applicant can lead on 2 applications (which must be materially different) and participate in a further two. Is this limit applied to each strand or across all four strands? (added 12 May 2023)

This is per strand, in relation to strands 1 and 2 only. There is an expectation that successful projects from strand 1 may bid into later windows of the other NZHF strands.

We are a company registered in Northern Ireland. Are we eligible for funding? (added 12 May 2023)

Any UK registered organisation should be eligible to apply for the funding. The NZHF aligns with the safe harbour limits of the EU’s General Block Exemption Regulation (GBER) so applicants impacted by the NI Protocol have the same eligibility criteria and intervention rates as those under the UK’s subsidy control rules. The only difference would be the definition of company size guidance but this is explicitly stated in the competition brief.

Can a project be its own offtaker? (added 19 May 2023)

Yes.

Supporting information

Given the high level of capital investment required, is funding deferred for reclaim after expenditure? (added 12 May 2023)

Grants will be paid as a percentage of the total eligible costs which have been defrayed on a quarterly basis.

Dates

Are we able to have an extension to the stated deadline? (added 12 May 2023)

Our competition milestones are absolute therefore, we are unable to change any of the competition dates.

When does the Net Zero Hydrogen Fund strand 1 (DEVEX) competition close? (added 12 May 2023)

Net Zero Hydrogen Fund strand 1 (DEVEX) will close on the 31 May 2023 at 11am.

An extension is not possible, therefore please allow sufficient time to complete your application. If you experience any technical issues, contact customer support services team before the deadline.

How to apply

What is expected in relation to the fugitive emissions associated with green hydrogen production? (added 12 May 2023)

Projects will need to provide a plan demonstrating how their hydrogen production plant will be designed and operated to ensure that fugitive hydrogen emissions are kept as low as reasonably practical.

It states that planning applications are eligible for DEVEX funding. Are other permits/consents also included? For example: Environmental Agency permit, Controlled Water Abstraction Licence, COMAH Management plans, Hazardous substance licensing? (added 12 May 2023)

Licenses and permits can be included in project costs as they are a legal requirement for specific activities but the cost must be attributable to the project. So if the project is 18 months long and you have to purchase a 2 year permit, your project can apportion the cost accordingly. If you only require the permit for a fraction of the project length then they need to include that element of the cost only.

If our application is successful, how often will we be expected to report? (added 12 May 2023)

Successful projects should expect to report quarterly, with claims quarterly in arrears.

I’ve submitted my application but need to make an edit. Is it too late to make a change? (added 12 May 2023)

If the competition deadline has not passed, you’re able to edit your submitted application. Please make sure you click “submit” again, otherwise your application will not be processed.

You will not be able to amend the application after the competition deadline has passed.

Please allow sufficient time to complete your application. If you experience any technical issues, contact customer support services team before the deadline.

Innovate UK normally receive a high number of calls and emails closer to the competition close date.

Low carbon hydrogen standard

What is meant by the term ‘consignment’? (added 19 May 2023)

Consignments are defined in the Low Carbon Hydrogen Standard (Version 2), under Section 8.1. This section includes examples of when the Department for Energy Security and Net Zero expect different feedstocks to be accounted for as separate hydrogen consignments.

Is my project allowed to use food or feed crops? (added 19 May 2023)

Yes, some of your hydrogen consignments can be made using food or feed crops, but note that these crops must still meet the relevant sustainability criteria, and for any biomass pathway, at least 50% (by LHV energy content) of the total biogenic hydrogen produced must be made using wastes or residues. Separate GHG emission calculations should be conducted for each consignment, and reported in the Dashboard tab of the Hydrogen Emissions Calculator along with their relative shares of the hydrogen output, in order to calculate an overall weighted average GHG emissions result.

Are the GHG emission methodology rules for biomass routes exactly the same as the UK’s RTFO? (added 19 May 2023)

The Low Carbon Hydrogen Standard takes the same approach as the UK’s Renewable Transport Fuel Obligation with regards to the biomass sustainability criteria, as well as the GHG emissions calculation methodology relating to direct land use change, plus separate reporting of indirect land use change emissions. The only current minor differences are that under the Low Carbon Hydrogen Standard, the following terms from the RTFO guidance cannot currently be claimed:

• bonus for using restored degraded land
• credit for soil carbon accumulation via improved agricultural management
• credit for avoided manure methane emissions