UK Energy Secretary and Net Zero head, Grant Shapps, is reportedly reevaluating a contentious plan to impose a £120 hydrogen tax on household energy bills in support of the emerging hydrogen industry. This potential U-turn follows severe criticism from Tory members and growing concerns about the financial strain on consumers amidst escalating costs.
Proposed to be in effect by 2025, the tax was meant to bolster the hydrogen sector. However, it has sparked controversy due to its perceived burden on struggling households without accounting for wealth disparity. As per Onward think-tank’s analysis, reaching the target of 10GW hydrogen production capacity by 2030 demands an estimated investment of £50 billion, or an additional £118 annually for dual-fuel households.
Currently, social and environmental levies contribute to £165 of the average annual dual fuel bill, with government subsidies mitigating financial pressure. With the hydrogen tax, this burden was anticipated to increase by 2030, aligning with the government’s hydrogen aspirations.
However, the Energy Bill, currently awaiting the committee stage after passing its second Commons reading, may undergo significant amendments. Department for Net Zero documentation suggests that the tax is designed to bridge the cost difference between low-carbon hydrogen and fossil fuels, providing enduring financial support for the hydrogen sector. Yet, the specific effect on consumer bills remains unclear as policy development and critical decisions are still underway.
This potential backpedaling on the hydrogen tax signifies growing apprehension about the affordability and fairness of transitioning to hydrogen energy. While building a hydrogen economy is integral to attaining net-zero emissions, policymakers must duly weigh the financial ramifications on households, especially those already economically disadvantaged. Striking a balance between securing sustainable funding and equitably distributing costs is critical to garner public endorsement and involvement in the transition.
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