Located at a former refinery, the 20MW plant is due online in 2028 and is expected to produce around 2,000 tonnes of green hydrogen per year, supplying industrial customers across Milford Haven and Port Talbot.

The FID was confirmed by UK electrolyser ITM Power, which received a notice to proceed with supplying its PEM technology in February.

ITM has also signed a ten-year long-term service agreement with MorGen to provide maintenance and support for the plant’s operations.

The West Wales project is among the first developments under the government’s Hydrogen Allocation Round 1 (HAR1) scheme to reach FID, and will receive revenue subsidies for 15 years once operational.

The scheme offers a strike price of £241/MWh – around £9/kg of hydrogen. Similar to power contracts for difference, the strike price tops up revenues when market prices fall below £241/MWh and claws back funds when prices rise above it.

MorGen CEO Werner Lieberherr said the investment decision was a “defining milestone” for the company and the UK hydrogen sector.

“This project demonstrates that green hydrogen projects in the UK can be delivered as bankable infrastructure investments when strong industrial demand is combined with clear and stable policy framework,” he said.

Despite the move, concerns remain across the UK hydrogen sector.

The HAR schemes have faced major delays, with HAR1 developments waiting well over a year to sign funding contracts after selection by the government. While a shortlist was announced for HAR2 last April, selections remain unclear.

Recent trade groups have been calling on the government to deliver its updated hydrogen strategy with a focus on demand creation – something that was promised to be delivered last autumn.