A new green hydrogen production facility is set to be built in Milford Haven, Wales, in a key development for the UK’s emerging low-carbon hydrogen sector.
Commodity trading giant Trafigura has confirmed that its energy arm, Morgan Energy, has approved the West Wales hydrogen project, which will be located on the site of a former oil refinery in the Pembrokeshire port. Construction is expected to begin later this year, with the facility designed to produce approximately 2,000 tons of hydrogen annually.
The project represents one of the first commercial-scale hydrogen schemes to go ahead under the UK Government's Hydrogen Allocation Programme, 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 generated from renewable sources.
Trafigura said the plant will be powered primarily by wind power, ensuring that the hydrogen produced qualifies as green hydrogen, meaning it produces no carbon emissions during production.
The hydrogen produced will be used in a number of industrial applications, including industrial heating, manufacturing processes, and potentially transportation, supporting efforts to decarbonize areas that are difficult to electrify.
UK Energy Minister Michael Shanks hailed the development as a major milestone for Britain's clean energy ambitions.
“This project represents one of the UK’s first commercial-scale low-carbon hydrogen production plants,” he said.
To make the project financially viable, the UK Government has agreed to guarantee the level of income for the plant for 15 years.
This support is designed to bridge the so-called “operating cost gap” between hydrogen production and traditional fossil fuels, which in many cases remain significantly cheaper.
In addition to the long-term revenue support mechanism, the project will also receive grant funding as part of the government's broader strategy to scale up hydrogen production across the country.
Trafigura chief executive Richard Holtom said government support was crucial to securing the final investment decision.
“Government support was vital in helping this project reach a final investment decision – demonstrating how public policy and private capital can work together to deliver new clean energy infrastructure,” he said.
The UK government has previously identified hydrogen as an important part of its long-term decarbonization strategy, particularly for heavy industry and sectors where electrification alone may not be sufficient.
Former Prime Minister Boris Johnson set a target in 2022 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 been halted or cancelled, including BP's planned large-scale hydrogen development, which was canceled in December.
Industry leaders have warned that Britain's hydrogen ambitions risk lagging behind competing economies due to infrastructure delays, investment uncertainty and insufficient demand for hydrogen fuel.
Claire Jackson, chief executive of industry group Hydrogen UK, previously said the government's 2030 production target now appeared “unachievable” without faster policy and investment action.
Hydrogen is widely seen as a vital part of the global transition to low-carbon energy systems because it produces no harmful emissions when burned.
Hydrogen can be produced in two main ways with a low carbon impact.
Green hydrogen is made by using renewable electricity to split water into hydrogen and oxygen through electrolysis. Blue hydrogen is produced using natural gas, with the resulting carbon emissions captured and stored using carbon capture technology.
Potential uses of hydrogen include powering industrial processes, fueling 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 industrial decarbonisation.
The electrolyser used at the Milford Haven project will be supplied by Sheffield-based hydrogen technology company ITM Power.
Electrolyzers are the main technology used to split water molecules into hydrogen and oxygen using electricity, and demand for the equipment is expected to increase significantly as hydrogen production increases globally.
ITM Power's involvement also highlights the potential of hydrogen projects to support UK manufacturing and technology supply chains.
Despite the growing interest in hydrogen, the industry still faces a number of structural challenges.
These include the need for new pipelines and storage infrastructure, greater industrial demand for hydrogen fuel, and viable commercial business models to support production costs.
In the case of blue hydrogen projects, development of carbon capture and storage infrastructure is also required to ensure emissions are safely controlled.
While the Milford Haven project is relatively modest in scale compared to some international hydrogen developments, it represents an important step in the creation of a commercial hydrogen market in the UK.
As the country continues its transition towards clean energy sources, projects like the West Wales Hydrogen Plant are expected to play a key role in testing how hydrogen can be produced, distributed and used at scale across the British economy.
jamie young
Jamie is a senior reporter at Business Matters, with over a decade of experience in UK SME business reporting. Jamie has a degree in Business Administration and regularly attends industry conferences and workshops. When not reporting on the latest business developments, Jamie is passionate about mentoring emerging journalists and entrepreneurs to inspire the next generation of business leaders.