The UK has taken a step forward with plans to fund its hydrogen subsidy schemes, as it announced a new plan to raise funds by levying an extra charge on companies using the UK's natural gas pipeline infrastructure.
Westminster gave few details, but could release more in the coming days, as the UK Parliament is set to resume work on the lengthy Energy Bill on 5 September, which will contain the provisions for the possible hydrogen levy.
The government plans to raise revenue with a levy targeted at "the gas shipping industry" and will consult with industry stakeholders before introducing the scheme levy, the department of energy security and net zero has confirmed.
This could mean higher charges on gas market participants shipping gas into or out of the UK's grid, but the government did not respond to requests to clarify.
The announcement should partially reassure hydrogen investors, who have been waiting for the UK to clarify how it will fund the hydrogen subsidy schemes it has set out. The UK had been mulling the idea of applying a levy to household bills, as it did to fund renewables, but this idea was ruled out by the energy secretary a few months ago after it proved politically unpopular. "The government listened carefully to the concerns raised regarding additional levies on energy suppliers," it said today.
This had left market participants waiting for the government to come up with an alternative fundraising mechanism. To provide some short term reassurance, the UK treasury had previously committed to fund the first subsidy allocation round for renewable hydrogen plants. Beyond that, the UK has still not confirmed a long-term mechanism to fund its hydrogen policies.
According to the government, its new approach to raise funds is fairer because it will be applied higher up the energy supply chain meaning costs will be spread to the sectors most likely to benefit from early hydrogen development.
The government was likely wary of burdening household consumers with the bill for hydrogen subsidies, given it has recently been more supportive of using the fuel for industrial switching, and cooler on the idea of using it to heat homes.
