India's Essar, Progressive Energy to set up $1.3 billion hydrogen hub in UK

CHENNAI (Reuters) - India's Essar Group said on Thursday it has formed a joint venture with the United Kingdom's Progressive Energy to invest 1 billion pounds ($1.34 billion) in building a hydrogen manufacturing unit at its Essar Stanlow refinery complex.

The joint venture, Vertex Hydrogen, will produce 1 gigawatt (GW) of hydrogen per year from two units from 2026, Essar said in a statement.

Essar, which owns 90% of the venture, said companies such as Tata Chemicals, Encirc, InterGen, Solvay, Ingevity, Novelis, Glass Futures and Saica Paper have already expressed interest in procuring hydrogen from Vertex.

The British government is targeting installation of 5 gigawatts (GW) of low-carbon hydrogen facilities by 2030 to reduce the share of natural gas in its energy mix.

Industry and policy-makers are increasingly looking to hydrogen to lower the environmental impact of sectors that have been the hardest to decarbonise and reduce the use of gas, but the investment required and the technical challenges are high.

The UK aims to replace up to a fifth of natural gas with "green" hydrogen, and use "blue" hydrogen, produced from natural gas and steam. Unlike green hydrogen, blue hydrogen is not emissions-free, but the carbon emissions are captured, stored and used in other applications.

($1 = 0.7447 pounds)

(Reporting by Sudarshan Varadhan; Editing by Subhranshu Sahu)