Prime Minister Sir Keir Starmer has reportedly overruled plans for BP’s H2Teesside “blue” hydrogen plant and instead moved to back proposals to designate Teesside as an "AI growth zone" and host a major data centre, according to media reports.
A letter from Business Secretary Peter Kyle — written when he was technology secretary and seen by The Telegraph, according to reporting — informed Tees Valley mayor Ben Houchen that the area would be selected as an AI growth zone and described the proposed data centre as "the cornerstone of the UK's AI strategy." A Downing Street source declined to deny that the prime minister had proposed changes to ministerial responsibilities during a recent reshuffle and said the prime minister was "delighted" that Energy and Net Zero Secretary Ed Miliband would continue to lead the department.
Officials say the data centre under consideration would be a sizeable net consumer of electricity rather than a source of local power generation. The Department for Science, Innovation and Technology (DSIT) said in a statement that "AI Growth Zones will transform local communities, delivering billions in investment and thousands of new jobs to give working people a real stake in our AI-powered future." The department added that it had received more than 200 expressions of interest from across the country, including from Redcar, and was working to identify the most promising sites.
H2Teesside was planned by BP to be a blue hydrogen facility, producing hydrogen from natural gas with carbon capture and storage to reduce emissions. The project aimed to capture and store more than 2 million tonnes of carbon dioxide a year — which has been described in reporting as roughly equivalent to the emissions from heating one million households. BP has signalled plans to invest up to £18 billion in the UK by 2030 and had proposed H2Teesside alongside other low-carbon projects in the area, including Net Zero Teesside Power and the Northern Endurance Partnership.
The move to favour an AI-focused development over a hydrogen project was reported amid a wider government repositioning that Downing Street frames as a renewed emphasis on economic growth as Labour seeks to address weak poll numbers. Media reporting said Sir Keir had suggested reassigning Mr Miliband during a recent reshuffle, asking him to take on ministerial responsibility for housing, a proposal Mr Miliband is reported to have declined in order to remain in charge of the government's net-zero agenda.
The reported decision to prioritise an AI growth zone highlights a potential trade-off between large industrial power demand and low-carbon energy projects that generate and capture emissions. Officials have said the AI Growth Zones programme is intended to deliver significant private investment and jobs, while proponents of hydrogen and carbon-capture projects note their role in reducing industrial emissions and supporting regional decarbonisation.
Separate reporting this week also noted that the new Work and Pensions Secretary, Pat McFadden, is expected to pursue measures to curb rising benefit costs — underscoring an administration-wide focus on growth and public finances. No formal cancellation of H2Teesside has been announced by BP or government departments; the accounts of the interventions are based on media reports and a letter reported to have been seen by The Telegraph.
DSIT said it was continuing to work with local leaders and potential host communities on AI Growth Zone proposals. BP and H2Teesside project partners did not immediately comment on the reported change in government support.