The UK government has backed away from plans to impose a direct annual hydrogen levy on household energy bills. Initially, the levy was proposed as part of the Energy Bill to support the country’s transition to green energy, specifically hydrogen production.
Last week, Conservative MP Craig Mackinlay, chair of the Net Zero Scrutiny Group, introduced several amendments to remove clauses related to the hydrogen levy from the bill. The objective is to shift the cost burden “higher up the energy supply chain,” spreading it among sectors that stand to gain from early hydrogen adoption.
The amendments come in the wake of concerns over the financial impact of the levy on consumers. A study by UK Onward, a centre-right think tank, estimated that the levy would have increased household bills by £118 by 2030. According to a poll conducted by the think tank, 43% of respondents were unwilling to support a hydrogen levy on their energy bills.
Jack Richardson, head of energy and climate at UK Onward, commented, “Dropping the hydrogen levy is the right decision to maintain public support for net zero and deliver politically sustainable funding for the industry.”
Doug Parr, Greenpeace UK’s chief scientist, agreed, stating on X (formerly known as Twitter), that passing the cost of hydrogen, especially blue hydrogen, onto consumers would be akin to indirectly subsidizing fossil fuels.
The government’s revised approach focuses on imposing the levy on the gas shipping industry, aiming to align the financial burden with those who will benefit from the UK’s emerging hydrogen economy. According to a Department for Energy Security and Net Zero spokesperson, “Our changes to the Energy Bill put fairness at the core of our low-carbon hydrogen plans, which will improve energy security and potentially lower bills in the long term.”
The government is set to consult with industry stakeholders before finalizing the new levy, which aims to support the UK’s goal of achieving 10GW of low-carbon hydrogen production by 2030.
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