The UK Government has confirmed the cancellation of the proposed hydrogen levy, which was designated to cover the costs of hydrogen production1. Energy Secretary Grant Shapps confirmed that the levy, set to take effect in 2025, will not be imposed on households1. The £120 annual charge had been intended to support the transition towards cleaner energy sources, particularly hydrogen, and was initially slated to be integrated into energy bills1.
In June, the Energy Secretary set out the position:
"We know we need to fund this transition, but we don't want to do it through household levies."
IGEM reports that Mr Shapps highlighted the government's intention to explore alternative funding methods to advance its net zero agenda, without adding to the financial burdens of households1. The Energy and Climate Intelligence Unit (ECIU) also states that the Government announced it would drop the proposal of a £120 annual levy on domestic energy bills to cover the cost of producing hydrogen2.
Polling for ECIU, carried out by YouGov with a sample of 2,020 adults, found that just a fifth of people (21%) think levies on energy bills should pay for converting the existing gas grid to support hydrogen for home heating, and just one in eight (12%) think levies should support the industrial hydrogen sector2. Half (50%) of people believed levies should support renewable energy projects, and more than a third (36%) back levies paying for insulation for low-income households2. When asked if they would support a levy of approximately £100 on the average household energy bill to pay for hydrogen energy infrastructure, around a third (36%) said they would support it, but more (43%) would oppose it2.
The two accounts differ slightly in framing: IGEM describes a confirmed cancellation of a levy set to take effect in 20251, while ECIU describes the Government having announced it would drop the proposal2. Neither source sets out the full legislative mechanism by which the levy was to be introduced or removed, and no replacement funding source has been reported.
| Levy purpose | Public support |
|---|---|
| Renewable energy projects | 50% |
| Insulation for low-income households | 36% |
| Converting the gas grid for hydrogen home heating | 21% |
| Industrial hydrogen sector | 12% |
Source: YouGov polling for ECIU2
Why it matters for households
The levy would have appeared as an annual charge on domestic energy bills, so its cancellation means that a cost that had been proposed for household bills from 2025 is not going ahead1. For a household considering how its heating is supplied and paid for, the decision removes one proposed route by which the cost of hydrogen production would have been recovered from billpayers, and leaves open how that transition will be funded instead1.
The policy position on hydrogen for home heating remains contested. ECIU notes that a recent study found 37 independent studies have concluded there will be no significant role for hydrogen in heating homes2. It also reports that the current gas grid may require upgrades to run on hydrogen, that households would need to change appliances including hydrogen-ready gas boilers adapted in situ, and that it has been reported households would need to drill a 4-inch hole in the ceiling to ensure that hydrogen in the home is safe to use2. ECIU states that electric heat pumps have a typical efficiency of around 300%, while gas and hydrogen-ready boilers have an efficiency of around 90%2.
What happens next
The Energy Bill was set to be debated again in Parliament in the week following 30 August 2023, and is expected to set out how the UK's hydrogen industry can be supported2. No alternative funding method for hydrogen production has been reported1.