Grant Shapps faces Tory mutiny over hydrogen levy plans


By Paul Homewood

h/t Ian Magness

Do the Tories have a death wish?


Grant Shapps, the new Energy Secretary, is facing a Tory backlash over plans for a hydrogen levy to be added onto household bills.

The extra green levy, which under Government plans would be added onto energy bills from 2025 to fund the production of low-carbon hydrogen, has been met with anger amid concerns households will be paying for energy that they never use.

It would be the first piece of legislation passed by Rishi Sunak’s new energy department, but Mr Shapps has been warned that the levy, which critics have branded as another tax, would stoke inflation, going against one of the Prime Minister’s five key priorities announced last month.

Former Business Secretary Jacob Rees Mogg said he tried to block the levies when he was the minister in charge of the bill under Liz Truss. 

“Let’s not beat around the bush, these levies are taxes and tax is already too high,” he told the Telegraph. “Putting more taxes will make the UK more inefficient.

“Energy is already expensive enough,” he added. “The Government should try to help people get cheaper energy, not more expensive energy. There is no justification for further levies on bills.” 

Mr Rees-Mogg said the row over the funding exposed the risks of having a standalone net zero department, after it was hived off from the business department in Rishi Sunak’s recent reshuffle.

“When I was in the department for business, energy and industrial strategy, there was some countervailing pressure from the business side to say is this economic?” he said. “But if they are just net zero zealots this is unlikely to be very economic.”

More Tory MPs have raised concerns that the levy would harm the economy.

Andrew Lewer, the Tory MP for Northampton South, said: “Anything in this current climate – just as it looks like bills will maybe start to come down – that will put them up again, will obviously cause a large number of people a great deal of concern.”

Marcus Fysh told the Telegraph: “I would be concerned about anything that was going to increase inflation at the moment, and it is inherently inflationary to put lots of new taxes on things.”

He also raised concerns about the viability of the “unproven” gas, saying: “I am concerned that hydrogen, unless it is really well thought through as an idea, is slightly problematic as it takes an awful lot of energy to make it in the first place.”

Energy bills have more than doubled since 2021, even after the government’s Energy Price Guarantee, and they are expected to stay high in the long term.

The Government has targeted the development of 10GW of low carbon hydrogen production capacity by 2030. The gas, which can be made using electricity or methane, could help decarbonise several sectors, including industry, fertiliser and heavy transport.

A decision has yet to be made about its use as a replacement for natural gas in home boilers. But dozens of recent studies suggest it will have limited use, partly because of costs, which are predicted to be at least 70 per cent higher than gas prices.

Tory peer Lord Lilley, who sits on the Lords Environment and Climate Change Committee said: “Hydrogen is a non-starter as a replacement for domestic gas to make households pay for something they will never receive is a double insult. It’s absurd to make people pay for something that is never going to happen.”

Labour Lords have drafted an amendment to the Energy Bill that would mean the levies could not be applied to households.

If successful, it would mark the first major setback for Grant Shapps since his appointment at the newly formed department last week.

Baroness Bryony Worthington, a cross-bench peer who co-authored the 2008 Climate Change Act, said she would support the Labour amendment.

“It’s a crazy idea, environmentally, plus cost and safety. All of those things point towards it being a mad idea,” she said. “And there’s absolutely no reason why the electricity bill payer should be picking up the tab for something which is essentially a way of the gas industry trying to save itself.”

Craig Mckinlay, the chair of the Net Zero Scrutiny Group, said he would back an amendment that removed the powers to levy hydrogen costs on energy bills.

“Any idea that hydrogen can ever be used for home heating in lieu of natural gas is fanciful – the infrastructure issues of the gas pipe network, which hydrogen cannot safely use, immediately makes it a non-starter,” he said. “By considering a further levy on household energy bills, the government is again trying to buck markets in trying to pick a technology.”

There are also concerns over the disruption to homes, which would need new appliances, pipes and smart meters, as well as extra ventilation to mitigate the combustion risk.

The Government’s plans only expect hydrogen to provide enough energy for 67,000 homes, or 0.2 per cent, by 2030, rising to meet up to 10 per cent of domestic heating demand by 2035.

The Energy Bill, which is going through the House of Lords, includes a provision that could see the development of hydrogen funded in a similar way to the offshore wind industry. Those costs are part of the roughly £150 of green and social levies applied to household energy bills.

Since the Tories are certain to lose the next election, why not just abandon all of these unpopular plans and let Labour get the blame for them?

At least some of the Tory MPs are starting to show a bit of backbone and common sense. Marcus Fysh, for instance, hits the nail on the head when he says:

“I am concerned that hydrogen, unless it is really well thought through as an idea, is slightly problematic as it takes an awful lot of energy to make it in the first place.”

The harsh reality is that most of the hydrogen that is likely to be produced in the foreseeable future will be via steam reforming natural gas, in a process which is energy inefficient, expensive, and carbon intensive. In other words, an utterly pointless exercise.

Bryony Worthington hints at the same problem when she says it is a way for the gas industry to rebrand itself.

As usual, of course, Labour oppose the levy, (though not the hydrogen programme), but don’t say where the money will come from instead! It is ironic then that it was the same Labour Party that set up the Renewables Obligation subsidy system, paid for through household energy bills!