A new green hydrogen production facility is to be built in Milford Haven, Wales, marking a significant development for the UK’s emerging low-carbon hydrogen sector.
Commodities trading giant Trafigura confirmed that its energy arm MorGen Energy has approved the West Wales Hydrogen project, which will be built on the site of a former oil refinery in Pembrokeshire port. Construction is scheduled to begin this year. The plant is expected to produce around 2,000 tons of hydrogen annually.
The project represents one of the first commercial-scale hydrogen programs to be advanced under the UK Government’s Hydrogen Allocation Scheme, which provides financial support to accelerate the development of low-carbon hydrogen production.
The Milford Haven facility will produce hydrogen using electrolysis, a process that splits water into hydrogen and oxygen using electricity from renewable sources.
Trafigura said the plant will be powered primarily by wind energy to ensure the hydrogen produced is considered green hydrogen, meaning there are no CO2 emissions during production.
The hydrogen produced will be used in a range of industrial applications, including industrial heating, manufacturing processes and potentially transportation, supporting efforts to decarbonize sectors that are difficult to electrify.
Michael Shanks, Britain’s energy secretary, described the development as a major milestone for Britain’s clean energy ambitions.
“This project represents one of the UK’s first large-scale low-carbon hydrogen production plants,” he said.
To make the project financially viable, the British government has agreed to guarantee a certain income for the facility for 15 years.
This funding is intended to close the so-called “operating cost gap” between hydrogen production and conventional fossil fuels, which in many cases continue to be significantly cheaper.
In addition to the long-term revenue support mechanism, the project will also receive grants as part of the government’s broader strategy to increase hydrogen production across the country.
Trafigura CEO Richard Holtum said the government’s support was crucial to the final investment decision.
“Government support was crucial to the final investment decision for this project – showing how public policy and private capital can work together to create new clean energy infrastructure,” he said.
The UK government has previously identified hydrogen as a critical part of its long-term decarbonization strategy, particularly for heavy industry and sectors where electrification alone may not be enough.
Former Prime Minister Boris Johnson set a 2022 target for the UK to produce 10 gigawatts of clean hydrogen capacity by 2030.
However, progress has been slower than expected. Several high-profile projects have stalled or been canceled, including BP’s planned large-scale hydrogen development, which was scrapped in December.
Industry leaders have warned that the UK’s hydrogen ambitions risk falling behind rival economies due to infrastructure delays, investment uncertainty and insufficient demand for hydrogen fuel.
Clare Jackson, chief executive of industrial group Hydrogen UK, previously said the government’s 2030 production target was now “unachievable” without faster policy and investment measures.
Hydrogen is widely seen as an important part of the global transition to low-carbon energy systems because its combustion produces no harmful emissions.
There are essentially two ways to produce hydrogen with a lower carbon footprint.
Green hydrogen is produced using renewable electricity to split water into hydrogen and oxygen through electrolysis. Blue hydrogen is produced from natural gas, with the resulting carbon emissions captured and stored using carbon capture technology.
Potential uses for hydrogen include powering industrial processes, powering heavy transportation, providing energy storage, and potentially replacing natural gas for heating.
The UK government has described hydrogen as “essential” to achieving its ambitions to become a clean energy superpower while supporting economic growth and industry decarbonisation.
The electrolysers used in the Milford Haven project are supplied by ITM Power, the Sheffield-based hydrogen technology company.
Electrolysers are the core technology for splitting water molecules into hydrogen and oxygen using electricity. Demand for these devices is expected to increase significantly as hydrogen production increases worldwide.
ITM Power’s involvement also highlights the potential for hydrogen projects to support the UK’s manufacturing and technology supply chains.
Despite the growing interest in hydrogen, the industry still faces several structural challenges.
These include the need for new pipelines and storage infrastructure, greater industrial demand for hydrogen as a fuel, and viable commercial business models to cover production costs.
For blue hydrogen projects, developing carbon capture and storage infrastructure is also essential to ensure emissions are safely contained.
Although the Milford Haven project is relatively modest compared to some international hydrogen developments, it represents an important step in establishing a commercial hydrogen market in the UK.
As the country continues its transition to cleaner energy sources, projects such as the West Wales Hydrogen Power Station are expected to play a key role in testing how hydrogen can be produced, distributed and used at scale across the UK economy.
