Net Zero Hydrogen Levy Plans Could Push Energy Bills Up by £120 a Year: Report

Household energy bills soared at the start of April. (Andrew Matthews/PA)

The extra levy for hydrogen could add £118 to annual household bills, a 10 percent increase on dual fuel bills under the government’s net zero plans, according to analysis.

A report from the centre-right think tank Onward published on Thursday claims that the levy to pay support for hydrogen production would raise energy bills by around £118 per year for the average dual-fuel household.

Funding the new hydrogen industry is seen as key to the UK’s plan to decarbonise all sectors of the economy, a target which has been signed into law, by 2050.

Onward said that this kind of funding investment would “be bad for business, raise household energy bills, and risk long-term investment by undermining support for net zero.”

“The government is walking into a trap with the hydrogen levy. It would be a mistake that risks stalling the development of a British hydrogen economy,” said Jack Richardson, Head of Energy and Climate at Onward.

“It would also be unfair to ask households that won’t benefit from hydrogen directly to pay for it. The government should think again. And the Treasury should get off the fence and back the role hydrogen can play in the economy,” he added.

The report was co-authored by the European Climate Foundation, a “philanthropic initiative to foster the development of a net-zero emissions society.” Some of its funders include the Bloomberg Family Foundation, the Children’s Investment Fund Foundation, and Rockefeller Brothers Fund.

Energy Security Bill

Under the Energy Security Bill, the purpose of the levy on consumer bills is to provide long-term funding for the hydrogen business model, which will “enable hydrogen producers to overcome the operating cost gap between low carbon hydrogen and fossil fuels.”

The government said that the levy is not expected to be implemented until 2025 (subject to legislation being in place) and it does not expect it to have impacts on consumer bills before then.

However, the report said that the Treasury is attempting to avoid the direct costs of supporting a hydrogen industry.

“This is understandable in a tight fiscal environment. But a levy would be regressive and unfair, especially when households will probably not use the hydrogen to heat their homes,” it added.

Onward polling found that 43 percent of the general public would not be willing to pay a hydrogen levy on their energy bills. A quarter of people would pay up to £10, whereafter support falls sharply.

Net Zero Scrutiny Group

The report also said that asking Members of Parliament to vote for bill rises during the current times of economic difficulties “risks political support for hydrogen, and the broader net zero agenda.”

It suggested to reduce the financial cost of supporting the hydrogen industry as much as possible, the government needs “to ensure the investment environment is conducive to lowering strike prices.”

In May, Conservative former minister Alec Shelbrooke criticised the hydrogen levy plans.

He said: “The costs that we pass onto the public have to be minimised. And I honestly hope that the minister will take note and take away, before the committee stage, about the hydrogen levy.

“I think it’s misguided and it’s in the wrong place, and we have to take the public with us on this and we can’t keep just adding to the bills of people to try and make this work.”

Financial Obstacles

In May, a report from Citizens Advice found that British homeowners face financial obstacles to making net-zero upgrades to their homes, citing upfront costs and a lack of interest in borrowing as significant factors.

Citizens Advice warned that the average £15,000 cost of retrofitting homes to go green would be unmanageable for most homeowners.

In February, a report from the Royal Society looked into one aspect of hydrogen and warned that there is no single, clear alternative to jet fuel able to support flying on a scale equivalent to present-day use.

It found that the UK would have to give up half its farmland to make enough alternative aviation fuel to meet its net zero ambitions.

It added that producing sufficient green hydrogen fuel would require 2.4 to 3.4 times the UK’s 2020 renewable, meaning wind and solar, electricity generation.

“This is one of those cases where the rhetoric of net zero collides with the reality of the way we live our lives,” Andy Mayer, energy analyst at the free market think-tank Institute of Economic Affairs, told The Epoch Times at the time.

A spokesman for The Department for Energy Security and Net Zero told The Epoch Times: “We’ve taken unprecedented action to drive down people’s energy bills, including covering around half of the typical household’s bill.

“We will continue to make sure bills are affordable in the long term and the costs of our energy transition are fair and affordable for all consumers,” he added.

“Our plans to power up Britain will ensure the availability of cleaner, cheaper, and more secure energy sources—this includes our work in developing the hydrogen levy,”  he said.

PA Media contributed to this report.