Debt Financing Low Carbon Projects in the UK
Unlocking Debt Finance for the UK’s Hydrogen Economy
The UK’s low carbon hydrogen sector is entering a pivotal phase. While global interest in financing hydrogen production is growing rapidly, very few projects have successfully secured third-party debt finance — and none yet in the UK. This research report produced by Eigen Ventures on behalf of the Hydrogen Innovation Initiative and Energy Systems Catapult explores why this financing gap exists, what needs to change, and how the UK can accelerate the transition from pilot projects to a commercially scalable hydrogen economy.
Drawing on interviews with more than 40 stakeholders across banking, infrastructure funds, insurers, project developers, government bodies and technology innovators, the study provides one of the clearest assessments yet of the barriers preventing hydrogen projects from accessing mainstream debt markets — and the practical solutions that could unlock billions in future investment.
Hydrogen is widely recognised as essential to achieving Net Zero, particularly in sectors where electrification alone is unlikely to succeed. From decarbonising steel, cement and chemicals production to enabling sustainable aviation fuel, heavy transport and long-duration energy storage, low carbon hydrogen is expected to become a cornerstone of the future energy system. Yet despite strong policy ambition, financing structures have not matured at the same pace as the technology itself.
Key Research Findings
Hydrogen debt financing remains at an early stage in the UK
The UK’s Hydrogen Production Business Model (HPBM) is viewed positively by industry
Offtake risk is the biggest barrier to debt finance
Large industrial users need to play a greater role
Most early-stage hydrogen projects are too small for traditional project finance lenders
SMEs face particular financing challenges
A dedicated Hydrogen Debt Fund could unlock smaller projects
Insurance and assurance solutions will become increasingly important
Limited recourse project finance is possible for some projects today — but only under specific conditions
Hydrogen market liquidity must develop quickly
Smaller projects are critical to long-term sector growth
The report concludes that stronger collaboration between government, industry, lenders and insurers will be essential to accelerate the growth of a commercially viable hydrogen economy in the UK. Follow the links below to access the research Executive Summary and Full Report.