In a potential reversal of plans, Grant Shapps, the Net Zero Secretary, is reportedly considering abandoning a proposal to add approximately £120 to Brits’ energy bills to fund the transition to hydrogen.
The decision comes in response to fierce criticism from Tory members and concerns about the financial burden on consumers already grappling with rising costs. The levy, aimed at supporting the fledgling hydrogen industry, has faced backlash due to its perceived impact on struggling households and the lack of consideration for income disparities.
The analysis conducted by the Onward think-tank estimated that achieving the target of 10GW of hydrogen production capacity by 2030 would require an investment of £50 billion. This translates to an additional £118 per year for dual-fuel households, prompting complaints about the equal burden placed on households regardless of their wealth.
Currently, social and environmental levies make up £165 of the average annual dual fuel bill, with the government providing subsidies to alleviate the financial strain. The proposed levy, scheduled for implementation by 2025, is expected to intensify by 2030 as the government seeks to achieve its hydrogen ambitions.
However, mounting speculation suggests that the Energy Bill, which recently cleared its second reading in the Commons and is headed for the committee stage, may undergo significant revisions. The accompanying Department for Net Zero documents indicates that the levy aims to bridge the cost gap between low-carbon hydrogen and fossil fuels, providing long-term funding for the hydrogen business model. The precise impact on consumer bills remains uncertain, as policy development and key decisions are still pending.
The potential scrapping of the hydrogen levy reflects growing concerns about the affordability and equity of the transition to hydrogen energy. While the development of a hydrogen economy is crucial for achieving net-zero emissions, policymakers must carefully consider the financial implications for households, particularly those already facing economic hardships. Balancing the need for sustainable funding with the fair distribution of costs will be essential in ensuring public support and engagement with the transition.
