Ofgem will award 9.07 million pounds ($12.09 million) of funding for the project, which will cost 12.7 million pounds in total. The remaining funding will come from project partners.
National Grid aims to start construction this year and begin trials next year.
The facility will be built from a range of decommissioned assets, to create a representative transmission network. Blends of hydrogen up to 100% will then be tested at transmission pressures to assess how the assets perform, National Grid said.
The hydrogen research facility will be separate from the main national transmission system, allowing for testing to be undertaken in a controlled environment, with no risk to the safety and reliability of the gas transmission network.
"If we truly want to reach a net zero decarbonised future, we need to replace methane with green alternatives like hydrogen," said Antony Green, project director for hydrogen at National Grid.
"Sectors such as heat are difficult to decarbonise, and the importance of the gas networks to the UK's current energy supply means projects like this are crucial if we are to deliver low carbon energy, reliably and safely to all consumers," he added.
(Reporting by Nina Chestney, editing by Louise Heavens)