Powering the future: Legal insight on driving demand for hydrogen in the UK

The UK’s journey to net zero relies on the development of additional renewable energy infrastructure. Hydrogen UK’s latest report entitled “Driving Demand” makes one thing clear: low-carbon hydrogen is indispensable for the country’s decarbonisation ambitions, especially in traditionally hard to abate sectors.

A few members of the Energy Team at Sharpe Pritchard had the pleasure of attending Hydrogen UK’s event to discuss this latest publication on 15 July.

Hydrogen UK is the leading trade association driving the large‑scale deployment of hydrogen solutions across the UK.

Hydrogen UK brings together over 100 member organisations spanning the entire hydrogen value chain, from producers and infrastructure providers to end‑users and technology innovators. The association’s core mission includes engaging directly with Government to grow markets and educating stakeholders on hydrogen’s transformational potential.

Why hydrogen, and why now?

The report underscores hydrogen’s critical role in decarbonising hard to abate industries, notably heavy industry (including chemicals, refining, paper and pulp, steel production, construction) and transport (including long-haul maritime and aviation).

Hydrogen can serve as a direct replacement for fossil fuels in many of these sectors, subject to consideration of process requirements, site characteristics, geography, local system constraints and operational requirements.

Current barriers to market

Hydrogen uptake is stalling, and the culprit isn’t technology – it is public policy, investment confidence, and lack of suitable infrastructure. To date, UK policy frameworks have focused on hydrogen production, with less emphasis on stimulating offtaker demand and supporting offtaker adoption of this form of energy.

The Hydrogen UK report identifies four main blockers to the transition to hydrogen as a primary form of energy:

1. Economics: Long-term offtake contracts are difficult to secure in an immature market, especially when carbon pricing is weak and capital access is tight.
2. Policy Uncertainty: Inconsistent regulations and funding delays have shaken investor confidence.
3. Infrastructure Gaps: A lack of transport and storage networks leaves producers and offtakers in limbo.
4. Technology Hesitancy: While there is sometimes a first mover advantage, many companies are waiting for others to prove hydrogen’s viability before committing.

This policy and investment friction is also difficult to manage from a legal perspective, particularly when navigating contract negotiations, regulatory approvals, subsidy eligibility, and ESG compliance.

Case study: Hydrogen in glass manufacturing

Hydrogen UK’s report contains a case-study that serves to illustrate the hurdles facing hydrogen’s industrial utilisation.

Pilkington UK is a leading glass manufacturer operating in St Helens, Merseyside. In partnership with Grenian Hydrogen, Pilkington is set to integrate green hydrogen into its float glass furnace, a process that demands continuous high-temperatures heat exceeding 1,500°C. Traditional electrification solutions were deemed unviable due to technical limitations and the operational sensitivity of glass production.

The report outlines the several key challenges Pilkington UK faced in implementing hydrogen technology at their glass manufacturing site:

• Energy Resilience: As a result of the temporal correlation rules under the Low Carbon Hydrogen Agreement, the hydrogen supply had to match renewable electricity generation. This created a lack of supply resilience, meaning Pilkington had to maintain a backup natural gas system, which significantly increased opex.
• Lack of existing hydrogen infrastructure: The absence of hydrogen transport and storage infrastructure created complex and costly logistics. Without a pipeline or on-site production, delivery of hydrogen became a material operational risk.
• Carbon pricing uncertainty: The UK Emissions Trading Scheme (ETS) did not provide a strong enough carbon price signal to justify the large upfront investment in fuel switching, thereby contributing to commercial uncertainty around return on investment.
• Market readiness and ‘green premium’: There was no widespread customer willingness to pay a ‘green premium’ for low-carbon glass products, undermining the business case for decarbonisation despite technical success.
• Support from offtakers: While the hydrogen developer side of the project was supported under schemes the HAR scheme (Hydrogen Allocation Round), there was minimal aid for the offtaker side of the equation, highlighting a policy imbalance between supply and demand support.

These barriers illustrate the legal, regulatory, and financial risks companies face when transitioning to hydrogen, thus reinforcing the need for clearer strategy, flexible policy tools, and legal expertise to help offtakers navigate project viability.

Through hydrogen fuel switching, Pilkington not only demonstrated the feasibility of hydrogen combustion for glass manufacturing but also laid the groundwork for decarbonising one of the UK’s most emissions-intensive processes.

The project highlights how site-specific needs (not just sector-level assumptions) must drive hydrogen deployment, and it underscores the legal and regulatory intricacies involved in planning, infrastructure access, and securing long-term energy contracts.

The legal sector’s role in hydrogen

For clients in energy, construction, logistics, or manufacturing, the hydrogen transition creates both opportunity and legal complexity. From drafting long-term hydrogen supply contracts to advising on infrastructure funding mechanisms, lawyers must now guide clients through:

• Risk-allocation in uncertain regulatory environments;
• Mandated low carbon purchasing and public procurement;
• Subsidy schemes (e.g., HPBM, IETF) and carbon pricing frameworks;
• Blending, transport, and storage approvals; and
• Site-specific decarbonisation strategies that meet emissions mandates.

The report calls for clear, integrated government strategy – legal advisors will play a pivotal role in helping businesses align with evolving frameworks.

Recommendations: A roadmap to unlock £20bn+ investment

Hydrogen UK lays out a policy wish list aimed at unlocking private capital, including:

• A refreshed, cross-departmental UK Hydrogen Strategy;
• Accelerated hydrogen transport and storage build-out;
• Clear carbon pricing and mandates for industrial offtake;
• Devex and capex grants for infrastructure and conversion; and
• Public procurement policies that favour low-carbon materials.

These policy shifts require sophisticated legal support, particularly for infrastructure developers, energy producers, and large-scale offtakers navigating planning, compliance, and funding landscapes.

As the UK recalibrates its approach to hydrogen, legal advisors must be ready to help clients seize the opportunities and manage the risks of this fast-evolving market.