Plans for a net zero levy on household bills, aimed at funding the development of low-carbon hydrogen, may be abandoned after the Energy Secretary expressed doubts about hydrogen replacing gas boilers for home heating.
Grant Shapps stated that it was “unlikely” hydrogen would be used for residential heating, citing concerns about penalizing those who don’t utilize it. The government is exploring alternative funding methods, including general taxation or industry contributions, as opposition to the levy mounts among lawmakers. This shift in stance has sparked a debate on the future role of hydrogen in decarbonizing the heating sector.
The proposal to charge households for hydrogen development has faced significant opposition due to concerns about the availability and cost of low-carbon hydrogen, which is expected to be at least 70% more expensive than gas. Safety and air pollution impacts have also been raised as potential challenges. The government’s decision on hydrogen’s role in home heating is expected in 2026, following village-scale trials. However, the apparent change of direction on the levy has been welcomed by critics, who argue that the burden should not fall on households.
While doubts surround its suitability for domestic heating, hydrogen is seen as a promising fuel for industry and transportation. The government has increased its hydrogen production target from 5 gigawatts to 10 gigawatts by 2030 as part of its response to the energy security crisis. Low-carbon hydrogen can be produced using excess renewable electricity or through emissions capture from natural gas, making it crucial for reducing emissions in heavy industry.
The challenge lies in finding a funding mechanism for hydrogen’s development that does not burden households. Think tank Onward has suggested carbon taxes on industry as an alternative to the household levy. Balancing the need for investment certainty in the hydrogen industry while avoiding additional costs for consumers remains a key consideration for policymakers.
Experts argue that the government should focus on supporting hydrogen’s growth through a combination of regulations, subsidies, and industry incentives, rather than passing the upfront costs to households. Ensuring access to cleaner and more affordable energy sources is a crucial aspect of the Energy Bill, and the government aims to consult on the levy’s design before its implementation.
