Grant Shapps, the energy security secretary, has indicated that the government will reverse its decision to impose a hydrogen levy on energy bills. The annual levy, expected to raise energy bills by approximately £118 per year, was set to be implemented in 2025 through the energy bill currently being discussed in parliament. Its purpose was to cover the costs of producing low-carbon gas and to shift away from polluting fossil fuels.
However, Shapps stated that he does not endorse a “direct levy on households,” suggesting a potential reversal as families grapple with high inflation and the recent unexpected interest rate hike. Instead, he suggested that the costs should be incurred “further up the chain.” Speaking to the Daily Telegraph, he emphasized the importance of establishing a robust hydrogen industry that can offer significant export opportunities and serve as a reliable energy storage and power source for heavy industries.
Shapps stressed that he does not wish to burden households with additional expenses. The thinktank Onward estimated that the levy would raise energy bills by £118 per year for the average dual fuel household. According to Shapps, alternative methods for transitioning to cleaner energy and achieving net-zero emissions should be explored, including passing the costs onto the energy industry or general taxation. He assured that the legislation’s wording would prevent the direct application of the costs to bills.
Shapps clarified that the controversy arose due to a clause in the energy bill that provided powers to impose a hydrogen levy, although it was not legally binding. He pledged to ensure that the clause explicitly states that the levy is not directly imposed on households.
Discussions between Shapps’ department, No 10, and the Treasury are underway to determine an alternative funding scheme before the parliamentary recess next month, as reported by the Telegraph.
The plans for the hydrogen levy faced criticism from within Shapps’ party as well as opposition MPs, who expressed concerns about further increases in energy bills amid the conflict in Ukraine and the cost of living crisis.
Labour accused the government of attempting to circumvent a rebellion from backbench Tories. Alan Whitehead, a shadow energy minister, described this as another humiliating U-turn for Chancellor Rishi Sunak, highlighting the government’s detachment from reality. He emphasized that millions of families are already struggling financially during the cost of living crisis. Instead, Labour pledges to overhaul Britain’s “broken” energy system and deliver an affordable and sustainable transition to green energy.
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