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(Bloomberg) — An English factory owned by Kleenex maker Kimberly-Clark Corp. is set to run on so-called green hydrogen later this decade after the plant’s developers approved investment in the £55 million ($73.6 million) project.
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The plant in northwest England is being developed by a joint venture of Schroders Capital and Carlton Power. It’s among the first commercial green hydrogen plants to move forward in the UK since the government introduced a subsidy program aimed at supporting investment in the fuel.
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Green hydrogen is made by using renewable electricity to split hydrogen and oxygen molecules in water. The resulting gas can be used instead of fossil fuels as a way to cut greenhouse gas emissions.
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While the fuel had been touted in recent years as the next big thing in clean energy, its high cost has left many projects stuck in the planning stage. Securing both a committed buyer for the hydrogen and government support was crucial to getting the investment over the line.
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“It has been essential that the project has been developed around the offtaker,” Kristian Hoeg Madsen, co-head of hydrogen investments at Schroders Greencoat, said in an interview. “The other part, which is also very important, is the government subsidies.”
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The project in Barrow will benefit from a government-backed contract under which consumers will subsidize green hydrogen to help make it cost-competitive with natural gas. Barrow will sell the fuel to Kimberly-Clark at around the market price of natural gas, while receiving top-up payments to bridge the cost gap.
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The developers have a contract to sell the hydrogen for £252.33 a megawatt hour. That’s nearly six times the current wholesale price of natural gas in the UK. Hoeg Madsen said he expects the cost to come down as the sector grows.
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The 30-megawatt production site, using machines from Plug Power Inc, will produce enough green hydrogen to cut Kimberley-Clark’s natural gas demand by 50% at the Barrow-in-Furness site, according to the companies. That will reduce some 18,300 metric tons of CO2.
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The consumer goods company currently uses gas to heat boilers used in the production of paper products such as Kleenex and Andrex toilet paper. Schroders and Carlton Power’s joint venture aims to build around 200 megawatts of green hydrogen projects across the UK by 2030.
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