UK Energy Act passed – with hydrogen levy attached




The UK’s Energy Act has today (October 26) received Royal Ascent with a hydrogen industry funding mechanism attached.


Slated by the government to unlock £100bn ($121bn) of private investments in energy infrastructure, scale up jobs and support Net Zero, the Act has finally completed its long journey to receive (procedural) approval from King Charles III.


For the hydrogen industry, it means a mechanism for funding government-backed developments has been passed – the long debated ‘hydrogen levy.’


After a thinktank earlier this year (2023) said if such levy was placed on taxpayers, it could increase the average dual-fuel household’s energy bills by £119 ($144) per year, the government amended the bill to see ‘gas shippers’ bare the cost.


A Department for Energy Security and Net Zero (DESNZ) spokesperson said the Act allows a levy to be placed on gas shippers through secondary legislation, which would only be introduced following consultation and after taking into account considerations such as energy bill affordability. It also enables the option of funding through the exchequer.


Clare Jackson, CEO of Hydrogen UK, welcomed the passage of the Act, saying it will lay the foundations for the UK’s future hydrogen economy, by creating the provisions for a Hydrogen Production Business Model and Hydrogen Transport and Storage Business Models.


The production business model is aimed at incentivising investments in low-carbon hydrogen production and use to meet the government’s 10GW capacity target by 2030, with the transport and storage models hoped to develop infrastructure connecting production and demand.


“This firmly indicates to the global hydrogen economy and international investors that the UK is serious about its Net Zero future, and the role hydrogen can play in it,” she said.


Although the Act contains the hydrogen levy defined in that language, a Hydrogen UK spokesperson told H2 View, the details of just how it will be implemented will be decided through consultation and secondary legislation.


In addition to providing a funding route for hydrogen production, storage and transport, the Act is aimed at helping deliver Net Zero by 2050 in what the government says is a “pragmatic, proportionate and realistic way.”


As such, the government confirms the act will facilitate the first large village hydrogen heating trial to provide “crucial evidence on the technology’s role in decarbonising heat,” despite a report by its advisors the National Infrastructure Commission (NIC) last week (October 18) completely ruling out hydrogen for domestic heating.


“Gas boilers, which currently heat around 88% of English buildings, need to be phased out and replaced by heat pumps… Heat pumps and heat networks are the solution. They are highly efficient, available now and being deployed rapidly in other countries,” it said.


“The Commission’s analysis demonstrates that there is no public policy case for hydrogen to be used to heat individual buildings. It should be ruled out as an option to enable an exclusive focus on switching to electrified heat.”


Set to convert a large village of 1,000-2,000 properties to hydrogen and alternative solutions instead of natural gas, the hydrogen village project will trial the conversion of existing gas network infrastructure to carry 100% hydrogen.


Both Northern Gas Networks (NGN) and Cadent has put forward proposals to host the trial in Redcar and Whitby respectively, but Cadent was ruled out by the government after a lack of local support, leaving only Redcar and NGN in the running.


The DESNZ spokesperson added, “We continue to develop the proposal for a hydrogen village trial in Redcar, Teesside with Northern Gas Networks (NGN). A decision on whether to proceed with the village trial in Redcar will be made later this year.”


Broader energy


Pegged to deliver a “more efficient energy system in the long-term,” to help keep energy costs low, the Act will introduce a new tender process aimed at reducing onshore electricity network operation and development costs – something the government says will save consumers £1bn ($1.2bn) from the energy bills by 2050.


Furthermore, a merger regime for energy networks will also be created under the Competition and Market Authority (CMA), to minimise the risk of mergers between energy network companies.


Additionally, the Act includes measures for energy smart appliances to prioritise safety and give consumers the confidence to transition to “smart products”


Energy Security Secretary, Claire Courtinho, said, “The Energy Act is the largest piece of energy legislation in a generation. It will boost investment in clean energy technologies and support thousands of skilled jobs across the country.


“It lays the foundations for greater UK energy independence, making us more secure against tyrants like Putin, and helps us to power Britain from Britain.


“The Act also supports our new approach to make sure that families don’t feel a disproportionate financial burden as we transition to Net Zero and forms a central part of our efforts to keep people’s bills affordable in the long-term.”


The North Sea Transition Authority has welcomed the Energy Act which requires licensees to report and retain carbon storage data which will subsequently be disclosed.


“Access to high quality data by the NSTA, industry and the public will help support UK energy security, the drive to Net Zero and the energy transition,” it said.



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