The Energy Transition | Government publishes updated UK Low Carbon Hydrogen Standard

This week's edition includes the Department for Energy Security and Net Zero's updated UK Low Carbon Hydrogen Standard, the UK's first agreed carbon capture and storage lease, National Grid reporting £1.65 billion consumer benefit from interconnectors and DESNZ releasing guidance on the Capacity Market appeals process.   

DESNZ publishes its updated Low Carbon Hydrogen Standard 

The Department for Energy Security and Net Zero (DESNZ) has published version four of its UK Low Carbon Hydrogen Standard (LCHS) that aims to support the UK's carbon reduction targets.

The LCHS outlines a methodology for calculating lifecycle emissions from hydrogen production and sets compliance requirements for hydrogen to be considered low carbon: a maximum volume of greenhouse gas (GHG) emissions permitted through the hydrogen production lifecycle. Compliant producers can be eligible for government subsidy through the hydrogen allocation rounds.

DESNZ stated that the updates are designed to improve clarity and simplify processes under the LCHS. The changes include:  

• Defining reporting units of 30-minute intervals during the operational period of a hydrogen production facility, for which the GHG content of each must be reported on at the end of each month.
• Expanded eligibility for biomethane supplied through the existing gas grid, allowing hydrogen and biomethane production plants to "virtually" connect.
• "Simplified" classification of refinery off gas.
• New evidential requirements for REGOs (renewable energy guarantees of origin).
• The inclusion of asphalt as a permitted solid carbon and clarification of (related) permitted production pathways for gas splitting.
• Improved guidance on stored feedstocks and fuels.
• Updated emissions factors, technical parameters and calculation methodologies.
• Restructured guidance and updated terminology throughout for improved clarity.
• New versions of hydrogen emissions calculators (HEC). 

Hydrogen producers will be looking to apply version 4 of the LCHS where required under relevant government schemes or contractual arrangements and use the updated HEC when assessing compliance with LCHS requirements.

In addition, the Welsh government has recently published its strategic policy position for hydrogen to demonstrate its commitment to and encouragement of the development and deployment of hydrogen infrastructure in accordance with the LCHS. DESNZ will continue to review and update the LCHS to ensure it remains fit for purpose and the Welsh government will work with the UK government to inform its relevance. 

Crown Estate agrees the UK's first carbon capture and storage lease 

The Crown Estate and Northern Endurance Partnership (NEP) have signed a lease for the UK's first commercial scale CO2 storage asset and associated infrastructure.  

The carbon capture and storage (CCS) lease, which runs until the completion of carbon injection (expected by the mid-2050s) will accompany the wider East Coast Cluster of onshore and offshore decarbonising infrastructure. It will enable the development of a saline aquifer carbon store approximately 140km offshore, together with nearby stores and associated pipework and infrastructure. It is expected that the leased area alongside other stores nearby, will allow for a storage capacity of up to 1 billion tonnes of CO2.  

The award of the lease was concurrent with the award of the UK's first ever carbon storage permit (also awarded to NEP) from the North Sea Transition Authority. 

The Crown Estate's CCS and hydrogen director, Denise Moylan, said the deal "signifies the clear potential" of the CCS sector.  

Start-up of the store is expected in 2028.  

National Grid reports £1.65 billion consumer benefit from interconnectors 

National Grid has reported that its subsea interconnector portfolio has saved consumers an estimated £1.65 billion since 2023, compared to a counterfactual scenario using combined cycle gas turbine (CCGT) generation. Interconnectors have imported around 86 terawatt-hours of electricity over three years, equivalent to powering 10 million households, with more than two-thirds of imports being zero carbon.

National Grid anticipates that, as GB renewable capacity grows, the current net‑import position will reverse in the 2030s, allowing exports that reduce wind curtailment and associated system costs. It also highlighted the link between interconnectors and energy security and emphasised the benefits of diversification of supply, different time zone and demand‑pattern differences across markets, and the flexibility that interconnectors offer the system operator.

National Grid also noted that over £300 million of payments to consumers have been made under the regulated cap-and-floor regime, positioning interconnectors as regulated infrastructure that both supports decarbonisation and, on its figures, lowers aggregate wholesale costs relative to a gas‑only alternative.

​Ben Wilson, president of National Grid Ventures, stated: "Diversity of supply enhances energy security, and by linking Great Britain to five other markets, National Grid provides access to a broader mix of energy sources... Interconnectors have lowered electricity prices for Great Britain consumers by enabling this".

DESNZ issues guidance on Capacity Market appeals process 

The Department for Energy Security and Net Zero (DESNZ) has published guidance on the Capacity Market appeals process for those holding capacity agreements under the Electricity Capacity Regulations 2014 and the Capacity Market Rules. The guidance covers termination notices and reduction notices, and the processes for appealing each of these to the secretary of state.

Termination notices 

The guidance clarifies that where a termination event occurs under rules 6.10.1 or 6.10.1A, which require a capacity provider to notify the delivery body if any of the listed termination events occur or are continuing, the delivery body will issue a termination notice to the capacity provider. This notice will detail the ground on which termination is being sought and note that the capacity agreement will automatically terminate 60 working days from the date of the notice, unless it is withdrawn or the notice period is extended following a successful appeal.

Under the regulations, a capacity provider that receives a termination notice may appeal to the secretary of state within 20 working days of the date of the notice. Appeals must take the specified form and can be made on either of two grounds. First, to request withdrawal of the termination notice, including evidence in writing demonstrating that the circumstances giving rise to the termination event have been resolved. Or, second, to request an extension to the date by which specified requirements must be met, including reasons for this request and a "cure" plan demonstrating how the grounds for termination will be addressed within the requested extension period.

The secretary of state may, where it deems it appropriate to do so, within three months of the termination notice direct that it be withdrawn.

Reduction notices 

The guidance also confirms that following an instance of non-compliance with either the extended years criteria (the requisite criteria to qualify for a capacity agreement with a duration of more than three delivery years) or the total project spend requirements (verification that incurred spending reached the requisite threshold for the capacity agreement where the duration of the capacity agreement exceeds one delivery year) under the rules, the delivery body will issue a reduction notice to the capacity provider. A reduction notice, unless appealed, automatically reduces the capacity agreement's duration with effect from 60 working days after issue.

Under the regulations, the recipient of a reduction notice can appeal to the secretary of state within 20 working days of the date of the notice using the specified form on either of the following grounds: to request withdrawal of the notice, including evidence in writing demonstrating that the circumstances giving rise to the reduction notice have been resolved; or to request an extension of the date by which the capacity provider must meet the specified requirement, including reasons for the request and a cure plan explaining how and when compliance will be achieved. The maximum extension period is six months from the date on which the reduction notice was given.

One type of appeal 

For both termination and reduction notices, the guidance clarifies that only one type of appeal can be pursued in respect of each notice: either for withdrawal or for an extension of time but not both. The secretary of state retains discretion to deliver a different outcome to that requested.

This article was written with the assistance of Adam Budd, Oliver Derham and Yasmine Jauffur, trainee solicitors, and Tomisin Agbonifo, paralegal.