The UK’s renewable energy sector is buzzing with anticipation following the government’s consultation on the future of the Climate Change Levy, particularly its implications for clean hydrogen. RenewableUK, the nation’s leading renewable energy trade association, has enthusiastically welcomed the move, seeing it as a potential game-changer for the industry.
At the heart of the matter is the question of how the levy should operate as more electricity is used to generate cleaner hydrogen. The concern is that the tax could become a barrier to the planned expansion of clean power. This is where RenewableUK’s Director of Future Electricity Systems, Barnaby Wharton, steps in with a clear vision. “We’re delighted to see this reform,” he asserts, “which will help to reduce the cost of green hydrogen for businesses and billpayers.”
Wharton’s optimism is backed by solid research. In January, RenewableUK released a report titled “Splitting the Difference,” which argued for exempting electricity used to make green hydrogen from the Climate Change Levy. This exemption is part of a broader package of measures aimed at cutting green hydrogen production costs by a staggering 58%.
The potential impact of this reform is immense. Green hydrogen, generated in high-tech electrolysers using renewable electricity, is crucial for decarbonising sectors that are notoriously hard to electrify, such as steel, chemicals, and shipping. These industries are significant contributors to greenhouse gas emissions, and finding a clean alternative is a priority.
But the benefits don’t stop at decarbonisation. Wharton highlights another critical advantage: “It can add vital flexibility to our energy system.” Green hydrogen can be stored and used whenever it’s needed, providing long-duration energy storage. This flexibility is essential for balancing and strengthening the energy system, making the best use of the vast quantities of electricity now being generated from renewables.
The consultation by Labour on the Climate Change Levy is a significant step forward. It signals a recognition of the need to adapt our tax policies to support the transition to a cleaner, more sustainable energy future. The renewable energy sector is watching closely, hoping that this reform will pave the way for a more cost-effective and flexible energy system.
The potential for green hydrogen is enormous, and the government’s consultation could be the catalyst that propels the UK to the forefront of this technology. However, it’s not just about the technology; it’s about creating an environment where innovation can thrive. By reducing the cost of green hydrogen production, the UK can attract investment, create jobs, and lead the way in the global race to net zero.
The energy sector is at a crossroads, and the decisions made today will shape its future. The consultation on the Climate Change Levy is more than just a policy review; it’s an opportunity to reimagine our energy system, to make it cleaner, more flexible, and more resilient. The renewable energy sector is ready to seize this opportunity, and the government’s consultation is a significant step in the right direction. The future of clean hydrogen in the UK is looking brighter, and the energy sector is eager to see how this story unfolds.
