A new green hydrogen production facility is set 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 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 around 2,000 tonnes of hydrogen annually.
The project represents one of the first commercial-scale hydrogen schemes to move forward 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 energy, ensuring the hydrogen produced qualifies as green hydrogen, meaning it generates no carbon emissions during production.
The hydrogen produced will be used across a range of industrial applications, including industrial heating, manufacturing processes and potentially transport, supporting efforts to decarbonise sectors that are difficult to electrify.
Michael Shanks, the UK’s energy minister, described 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 a 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 conventional fossil fuels, which remain significantly cheaper in many cases.
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 Holtum said government support had been crucial to securing the final investment decision.
“The government’s backing was key to this project reaching 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 a critical part of its long-term decarbonisation 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 stalled or been cancelled, 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 competing economies due to delays in infrastructure, investment uncertainty and insufficient demand for hydrogen fuel.
Clare Jackson, chief executive of industry group Hydrogen UK, previously said the government’s 2030 production target now appeared “undeliverable” without faster policy and investment action.
Hydrogen is widely seen as an important part of the global transition to low-carbon energy systems because it produces no harmful emissions when burned.
There are two main ways hydrogen can be produced with lower carbon impact.
Green hydrogen is created 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 for hydrogen include powering industrial processes, fuelling heavy transport, 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 also supporting economic growth and industrial decarbonisation.
The electrolysers used in the Milford Haven project will be supplied by ITM Power, the Sheffield-based hydrogen technology company.
Electrolysers are the core 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 expands globally.
The involvement of ITM Power also highlights the potential for hydrogen projects to support UK manufacturing and technology supply chains.
Despite 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 fuel, and viable commercial business models to support production costs.
In the case of blue hydrogen projects, the development of carbon capture and storage infrastructure is also essential to ensure emissions are safely contained.
While the Milford Haven project is relatively modest in scale compared with some international hydrogen developments, it represents an important step in building a commercial hydrogen market in the UK.
As the country continues its transition toward cleaner energy sources, projects such as 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 Senior Reporter at Business Matters, bringing over a decade of experience in UK SME business reporting.
Jamie holds a degree in Business Administration and regularly participates in industry conferences and workshops.
When not reporting on the latest business developments, Jamie is passionate about mentoring up-and-coming journalists and entrepreneurs to inspire the next generation of business leaders.
