Green hydrogen plant to be built in Milford Haven as Trafigura backs Welsh clean energy project

A new green hydrogen production facility is to be built in Milford Haven, Wales, marking a significant development for the UK’s emerging carbon hydrogen industry.

Commodities giant Trafigura has confirmed that its energy division, MorGen Energy, has approved the West Wales Hydrogen project, which will be located at a former oil refinery in Pembrokeshire. Construction is expected to begin later this year, and the facility is designed to produce 2,000 tons of hydrogen annually.

The project represents one of the first commercial hydrogen projects to progress under the UK government’s hydrogen allocation scheme, 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 mainly 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 many different industries, including industrial heating, manufacturing processes and possibly transportation, to support efforts to decarbonise sectors that are difficult to electrify.

Michael Shanks, the UK’s energy minister, described the development as a milestone in Britain’s clean energy ambitions.

“This project represents one of the UK’s first carbon hydrogen production plants,” he said.

To make the project financially viable, the UK government has agreed to guarantee a level of income to the industry for 15 years.

This support is designed to close the so-called “operating cost gap” between hydrogen production and conventional fuels, which remain much cheaper in most cases.

In addition to long-term revenue support, the project will also receive funding as part of the government’s broader strategy to increase hydrogen production across the country.

Trafigura’s chief executive, Richard Holtum, said government support was key to the final investment decision.

“Government support was essential for this project to reach a final investment decision – demonstrating how public policy and private finance can work together to deliver clean energy infrastructure,” he said.

The UK government has previously identified hydrogen as an important part of its long-term decarbonisation strategy, particularly in 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 suspended or canceled, including major hydrogen development projects planned for BP, which were scrapped in December.

Industry leaders have warned that the UK’s hydrogen ambitions are at risk of falling behind competing economies due to infrastructure delays, investment uncertainty and insufficient demand for hydrogen fuel.

Clare Jackson, chief executive of industry group Hydrogen UK, previously said the government’s 2030 production targets now looked “undeliverable” without urgent 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 in which hydrogen can be produced through 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 mass transportation, providing energy storage and replacing potential natural gas for heating.

The UK government has described hydrogen as “critical” to its ambitions to become a clean energy giant while also supporting economic growth and the decarbonisation of industry.

The electrolysers used in the Milford Haven project will be supplied by ITM Power, a Sheffield-based hydrogen technology company.

Electrolyses are the basic technology used to split water molecules into hydrogen and oxygen using electricity, and the demand for the equipment is expected to grow significantly as hydrogen production increases worldwide.

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 several structural challenges.

These include the need for new pipelines and storage infrastructure, high industrial demand for hydrogen fuel, and efficient business methods to support production costs.

In the case of blue hydrogen projects, the development of carbon capture and storage infrastructure is essential to ensure that emissions are safely contained.

Although the Milford Haven project is small scale compared to international hydrogen developments, it represents an important step towards building a commercial hydrogen market in the UK.

As the country continues its transition to clean 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 in the British economy.