Notice

Strand 2 clarification questions (updated 19 May 2023)

Updated 27 February 2024

General

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.

Summary

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

Can I apply the same project for Strand 2 and Strand 3? (added 12 May 2023)

No. Strand 2 projects must not require a Hydrogen Business Model at any stage, whilst Strand 3 projects are expected to require a Hydrogen Business Model.

Will there be another funding window for NZHF strand 2? (added 12 May 2023)

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

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. How 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.

Can we include multiple sites in one project? (added 12 May 2023)

Developers are advised to make separate applications for hydrogen production facilities based at different sites. If the production facilities are not independently deliverable, developers can submit a single application with a justification for why the sites should be considered together.

When are projects expected to start? (added 12 May 2023)

Projects that are successful are expected to start 1 November 2023.

There are a number of documents and financial checks that are required between being informed you are successful and project start date.

When are projects expected to finish? (added 12 May 2023)

Successful projects are expected to start on 1 November 2023 and must end by 31 March 2025.

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

We’re currently running a prototype and expecting to be TRL 7 later this year. Can we apply now even though we’re not TRL 7 now? (added 12 May 2023)

No, your project must use technology demonstrated at a minimum of TRL7 at the time of application to the fund.

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, refer to the eligibility section of the competition brief.

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.

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.

What does it mean that a project does not require a hydrogen specific business model? (added 12 May 2023)

Strand 2 of the NZHF is designed for projects that are not seeking revenue support through the Hydrogen Production Business model and can deploy on the basis of capital expenditure support from the NZHF.

The hydrogen production business model will provide revenue support to hydrogen producers to overcome the operating cost gap between low carbon hydrogen and high carbon fuels. It cannot be accessed through an application to Strand 2 of the NZHF.

More information on the hydrogen production business model can be found here.

Scope

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).

Would a project producing hydrogen through cavitation be supported by this competition? (added 12 May 2023)

Cavitation is not a listed production pathway in the Low Carbon Hydrogen Standard version 2 (LCHS V2) and is therefore not supported by the NZHF Strands 1 and 2 competitions.

Other hydrogen production pathways may also be able to meet the GHG emissions threshold and criteria of the LCHS V2. Stakeholders wishing to add production pathways to this list are invited to submit evidence to DESNZ via [email protected]. Please view Chapter 3 of the Low Carbon Hydrogen Standard Version 2 guidance document for more information about the evidence required. Please note that new pathways would not be included in the LCHS V2 in time for this competition window, however.

For electrolysis projects, is renewable energy production equipment (e.g. wind turbines) included within the funding scope for strand 2? (added 12 May 2023)

We will not provide CAPEX for costs for electricity generation assets such as wind farm, turbine acquisition or solar array.

What is the expected Financial Investment Decision (FID) for projects applying to Strand 2? (added 12 May 2023)

The competition guidance for strand 2 states that FID must be taken within 3 months of contract award.

What do you mean by ‘at-scale’? (added 12 May 2023)

Strand 2 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.

Eligibility

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.

If a project would need to incorporate a company in the UK, would they then be eligible? (added 12 May 2023)

To be eligible, a project must be registered in the UK and must carry out all of its project work in the UK.

If domestic markets do not exist at scale for derived product (Green Hydrogen or Green Ammonia) can a percentage of export content be allowed? (added 12 May 2023)

Hydrogen production projects targeting export opportunities will be eligible to apply to strand 2 of the NZHF but we would expect the project’s primary offtaker to be focused on domestic consumption.

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

For capital expenditure (CAPEX) support, you could get funding for your eligible project costs of up to 30% if you are a UK registered business of any size.

Does strand 2 need an end use for the hydrogen such as a burner and steam boiler combination? (added 12 May 2023)

Projects must intend to exploit the results from hydrogen production from or in the UK and be able to demonstrate relevant commercial engagement. Projects will be expected to detail their engagement with primary offtakers, including a summary of the agreements that have been reached, and the use and necessity of the hydrogen by the potential offtakers connected to your project.

What is the maximum size of hydrogen production this competition will consider? (added 12 May 2023)

There is no limit on the size of hydrogen production this competition will consider.

Do intended participants in Strand 2 need to have participated in Strand 1 in earlier competition? (added 12 May 2023)

No. Strand 1 and Strand 2 are separate competitions. 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. Applicants supported through the NZHF strand 1 could, at a later date, be eligible to apply for further support through NZHF strand 2, HAR2 or the cluster sequencing process depending on the needs of their projects.

Can you please confirm when projects are required to take FID by? (added 12 May 2023)

Projects are expected to take FID within 3 months of receipt of a conditional grant offer letter. All funded activities must end completed by 31 March 2025 as projects will not be able to drawdown funding after this point.

Lead times for critical items, i.e. electrolysers, are currently looking around 18-24 months which makes the required completion date of 31 March 2025 potentially very tight. Are we able to request extensions? (added 12 May 2023)

The aim of this competition is to support low carbon hydrogen projects that can deploy on the basis of capital expenditure support and are able to start construction rapidly. Therefore we expect to award funding to projects which are able to meet the deadlines laid out in the competition brief.

Please clarify that 50% of the biogenic feedstock has to be waste or residue - for example does this mean if we used only energy crops such miscanthus, we would not be eligible? (added 12 May 2023)

Yes that is correct. Please see the annexes to guidance on the Low Carbon Hydrogen Standard Version 2, Section 1.2 for further information.

The company is funded by both public (local authority) and private sector investors, can you please confirm if 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)

The private sector company has to be the lead. Any funding received from the local authority would need to be considered in order to assess subsidy control compliance. Receipt of funding from a local authority would not necessarily preclude a project from receiving Strand 1 funding, but could reduce the amount of funding we could provide.

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.

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 2 (CAPEX) competition close? (added 12 May 2023)

Net Zero Hydrogen Fund strand 2 (CAPEX) will close on 7 June 2023 at 11am.

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

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.

The Support Services team normally receive a high number of calls and emails closer to the competition close date.

Low carbon hydrogen standard and Hydrogen emissions calculator

We are producing hydrogen using a production pathway that is not included in the standard, how can we ensure this pathway is included in future standard iterations? (added 19 May 2023)

Production pathways with evidence of compliance with the standard are invited to submit this to the Department for Energy Security and Net Zero for analysis, with the full methodology clearly outlined. The Hydrogen Emissions Calculator is a useful tool for working through the standard methodology. However, as your pathway has not yet been considered within this guidance, it may not contain everything you need - therefore we would need to see as much evidence and background information as you are able to share. This can be provided in the format you see fit and should be submitted to [email protected].

Following sufficient scrutiny, we may then consider potential inclusion in future standard publications, aligned with wider review points. The Department for Energy Security and Net Zero will need to model the likely emissions from the pathway proposed and develop further detail on the methodology.

We have taken this approach to ensure that the current policy positions work for the new process and there are no unintended consequences of new pathways within the standard as it is designed.

Further guidance on this process can be found in chapter 3 of the Low Carbon Hydrogen Standard.

If an electrolysis project is using mixed electricity inputs, can it select mixed electricity for the theoretical compression and purification? (added 19 May 2023)

If your project uses mixed electricity inputs, select the electricity input with the highest GHG emission intensity as the source of the electricity for the theoretical compression & purification.

I don’t source renewable electricity, but can I still select this for compression and purification? (added 19 May 2023)

As above, please select the electricity input with the highest GHG emission intensity as the source of the electricity for the theoretical compression & purification. If your project does not source renewable electricity, this should not be selected as the source of the electricity for the theoretical compression & purification.

If my pressure and purity are above the theoretical minimum, where do I account for the emissions related to compression and purification in the calculator? (added 19 May 2023)

If the output hydrogen pressure and purity are above the theoretical minimum, then there are no added theoretical emissions in compression or purification to account for – only those compression and purification emissions that occur within your project. Applicants ought to input all the power and other inputs required to reach this output state in the final processing tab. The one exception is if they have selected Default for “Energy Supply”, in which case, the workbook will calculate the added emissions to go beyond 3MPa and 99.9 vol% purity, and record these in the theoretical compression/purification lines.

I am using the electrolytic specific workbook; why is there a section on CO2 capture? (added 19 May 2023)

The section on CO2 capture may remain relevant for some electricity sources. If no CO2 capture is involved in the supply chain, these sections can be ignored.

If we use more than one workbook for multiple consignments, should we upload them all with our application? Do we need to complete the dashboard in them all? (added 19 May 2023)

If you use more than one workbook, please upload all your workbooks, with clear file names. Please do not leave any spaces or gaps in the filenames – please use underscores “_” in the filenames instead of spaces, gaps or other characters. You should complete the dashboard in every workbook, including the consignment table, so that the assessors can see your answers and calculations for each consignment.

I have been watching the HEC training videos and there is a lot of mention of “feedstock consignments” - what does this mean? (added 19 May 2023)

“Feedstock consignments” is shorthand for a consignment of hydrogen derived from a particular feedstock.

Under the “electricity inputs” section for Electrolysis, there is a requirement to “reference documents evidencing the contractual details of the electricity input arrangements (e.g. PPA details covering ownership of the associated generation)”. Can you confirm what documents are required to demonstrate this? (added 19 May 2023)

A letter of intent/evidence of engagement is the minimum requirement.  Whilst a contract is not essential (we recognise that this is unlikely in some situations) you should keep in mind that, if successful, you will need to move towards construction and operation quickly, and so the arrangements should be as firm as possible.

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

When filling in feedstock and coproduct data within the Hydrogen Emissions Calculator (HEC), should I report a dry or wet LHV in column J of the various step worksheets? (added 19 May 2023)

In each of the relevant pathway step worksheets of the HEC (the set of tabs furthest to the right of the workbook), you should report LHV (MJ/kg dry) within column J, as otherwise the moisture content from column L will be double counted when calculating the MWh/yr values. If in doubt, please follow the formulae in section 6.4 and 6.4.10 of the LCHS main guidance. This is particularly important for pathways using non-default biomass/waste feedstocks that contain moisture.

Regarding the GHG emissions calculation, can you please provide further detail on the system boundary that should be considered for this assessment? (added 19 May 2023)

The system boundary and GHG methodology that is to be used is set out in the Low Carbon Hydrogen Standard, in chapter 6.

How many Excel workbooks do I need to complete and submit? (added 19 May 2023)

If you are an electrolytic project, we expect you to submit one single Excel workbook, that covers up to 4 separate consignments (renewable electricity, nuclear electricity, grid electricity and one other electricity source). If you are electrolytic project using multiple other electricity sources, please submit an Excel workbook for each of these other electricity sources, and complete or expand the Dashboard consignment table to calculate your overall weighted average GHG emission result.

If you are a project using fossil natural gas from the UK gas grid as your only feedstock, you will only need to provide one Excel workbook. If you are not sourcing your natural gas from the UK gas grid (e.g. from multiple imported LNG sources), then please submit an Excel workbook for each of these consignments and complete or expand the dashboard consignment table to calculate your overall weighted average GHG emission result.

If you are a project using multiple biomass feedstocks, then please submit an Excel workbook for each of feedstock consignments and complete or expand the dashboard consignment table to calculate your overall weighted average GHG emission result.

If you are a project using mixed waste with biogenic and fossil fractions, this can be dealt within one single Excel workbook that covers these 2 separate consignments. However, if you are a project using mixed waste along with other biomass or waste fossil feedstocks, please submit an Excel workbook for each of these consignments and complete/expand the Dashboard consignment table to calculate your overall weighted average GHG emission result.

Is the hydrogen emissions calculator locked down, so that formulae cannot be viewed? (added 19 May 2023)

The hydrogen emissions calculator is not locked using password protection, so users can see and click on the formulae that are used to calculate your GHG emission results in each emissions category within each worksheet. However, it is not possible to change these Excel calculation formulae – a warning message is displayed if the cursor moves over the cell, and an error message arises if the user tries to change the calculation formulae (requiring the change to be undone). This is because the Hydrogen Emissions Calculator follows the GHG methodology set out in the Low Carbon Hydrogen Standard.

The new low-carbon hydrogen standard states that electrolysis pathways using electricity from biomass/waste feedstocks should expand their GHG emissions calculations to include feedstock sustainability criteria and that this should be treated as energy-supply related emissions. Within section 6.4.10 it asks you to calculate the Allocation Factor for co-products with upstream supply chain steps factored in for conventional biomass/waste pathways. Are these steps also required for biomass/waste to electrolysis pathways? (added 19 May 2023)

Allocation factors are the % of upstream and step emissions assigned to a (co)product from a step in the production pathway, based on the energy content of the specific (co)product divided by the energy content of all (co)products from that step. They apply to every step in any production pathway, where ‘step’ refers to any physical stage in the production pathway from feedstock through to hydrogen production (including, where relevant, feedstock production, any intermediate pre-processing, feedstock storage & transport, as well as the industrial processing facility generating hydrogen as the final step). Biomass/waste to electrolysis pathways also need to use allocation factors for every relevant step in the upstream supply chain, from the point of feedstock acquisition (be that biomass cultivation & harvesting, or from the point of feedstock collection for wastes).

The pathway we are considering applying to the NZHF is will turn waste-wood to electricity for electrolysis. Do you have a standardised process that is required to be used for the calculation of emissions for waste to electrolysis processes? (added 19 May 2023)

Chapter 6.4 of the Low Carbon Hydrogen Standard (LCHS) sets out the methodology to be followed in the calculation of emissions. The Hydrogen Emissions Calculator (HEC), available online, puts this methodology into practice, and enables the user to input the relevant data to determine likely GHG emissions and LCHS compliance. Chapter 7 and Annexes A, C and D are also especially important for a process of this nature to consider.