Grant Shapps may drop £120 hydrogen net zero levy on household bills.
Plans for a new net zero levy on household bills could be dropped after the Energy Secretary admitted hydrogen would not replace gas boilers.
Households could be hit with an estimated £120 annual levy to fund the development of low-carbon hydrogen under provisions in the Government’s incoming Energy Bill.
But Grant Shapps told Politico it was “unlikely” that hydrogen would be used to heat homes in the future, and that he wanted to avoid “a situation where a levy is penalising people who don’t use it”.
The Government is considering possible alternatives to funding development of the hydrogen industry through household bills, Mr Shapps said. This could include general taxation or putting the costs on industry.
Last year, the Government doubled its target for hydrogen production, from 5 gigawatts to 10 gigawatts by 2030, as part of its response to the energy security crisis.
The move pushed the costs of hydrogen production to £3.5 billion a year between 2030 and 2040, which would amount to a £118 levy on annual household bills, according to estimates from think tank Onward.
The costs would be in addition to existing green and social levies of around £125 a year, which fund onshore wind and insulation schemes.
Significant opposition
The proposal to force households to pay for the development of hydrogen was met with significant opposition among Tory MPs and peers. A final decision from the Government on hydrogen’s role as a replacement for gas in home heating is due by 2026, following village scale trials.
But concerns have been raised over the availability of low-carbon hydrogen, and costs which are predicted to be at least 70 per cent higher than gas. Concerns have also been raised about its relative safety, and air pollution impacts.
Mr Shapps told Politico that the Government does believe in a “hydrogen economy” but that it was better suited as a fuel for industry and transport.
The apparent about-turn on the levy was welcomed by MPs and critics of hydrogen as a domestic heating fuel.
Grant Shapps may drop £120 hydrogen net zero levy on household bills, June 13, 2023
