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.
https://www.telegraph.co.uk/politics/2023/02/11/grant-shapps-faces-tory-mutiny-hydrogen-levy-plans/
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!
Comments are closed.
NOT A LOT OF PEOPLE KNOW THAT 
Those who the gods wish to destroy, they first make mad.
“There is more stupidity than hydrogen in the universe, and it has a longer shelf life.”
28 Dunstan StreetSherborneDT9 3SE01935 817588
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Paul….I think the above needs to be deleted.
Sorry no idea how this got here please delete as I can’t!
Barbara
I’ve stuck a Post-It note on the screen, over it.
There needs to be a mutiny against ALL of the “climate”, “green”, “anti-car”, “net zero”, invented and increased taxes and regulations madness. Nobody voted for any of these whichever party (except the Green party) they actually voted for. Yet they ALL have this hatred of ordinary people and businesses on their manifestos and claim that people did vote for these things
Yep, by taking part in elections in our sham democracy you give them the legitimacy to claim you support them. The best solution next year is to not vote and send the turnout plummeting. The winner of the West Lancashire by-election has the wholehearted support of less than 20% of the electorate on a turnout of 31.4%. If people do vote them we must hope that the Tories are wiped out and the party dies to allow a real conservative party to take its place.
“The Government should try to help people get cheaper energy,
Hear Hear, Moggy.
Lets start building Nuclear Power Stations. In the meantime go for all the quick wins, eg coal and onshore gas.
Craig Mckinlay: “… the government is again trying to buck markets in trying to pick a technology”
Can include Sizewell C and Hinkley Point C to that.
“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.”
That has to rate as the biggest understatement from any MP!
On a par with “But if they are just net zero zealots this is unlikely to be very economic.”
Grant Shapps hasn’t achieved anything worthwhile in any of the government departments he has occupied and I cringe every time he manages to wangle himself yet another new job.
He will continue to be an unmitigated disaster in this one and I’m guessing that when he loses his seat at the next election he will be looking to join the gravy trainers like Lord Deben.
The Zero Carbon zealots have destroyed the energy security and the competitive edge the Western World once had and we have become second rate nations reliant on goods and energy from horrendous countries like China and Russia.
Look at Shapps’s Wikipedia entry: it seemed to me between the very poor and very discreditably worrying.
He’s as bent as the rest of them but it never held him back.
This from The Guardian (I know – I wouldn’t normally) in 2015:
“Grant Shapps, the Tory party chairman, had a second job as a “multimillion-dollar web marketer” under the pseudonym Michael Green for at least year after he first became an MP in 2005.
“It is a suggestion that Shapps has repeatedly denied for three years, but the Guardian has discovered a recording from the summer of 2006 in which the Conservative MP for Welwyn Hatfield boasts his products could make listeners a “ton of cash by Christmas”.”
Anyone who promises “get rich quick if you buy my services” is clearly a fraudster. If you really knew how to get rich quick you’d just keep it you yourself and get rich quick, wouldn’t you?
I totally agree. Schapps is serially useless. Why on earth is he still up there? I would add to his failings the disastrous so-called smart mptorways.
A key part of the scheme is this:
https://www.current-news.co.uk/news/uk-government-to-launch-new-certification-to-provide-reliable-hydrogen-tracing
By only allowing green hydrogen they force the high cost production route. It’s surely suicidal for industry to be forced to be completely uncompetitive. The reality is they haven’t begun to cost green hydrogen properly. There are devious schemes designed to try to hide the cost, such as using dedicated offshore floating wind farms at enormous cost, which will do nothing to absorb wind surpluses in the rest of the wind fleet. The cost of doing that (or curtailing) will fall to consumers.
The reality is that wind surpluses will be intermittent and variable, and that makes hydrogen production an expensive exercise, howsoever it gets used. That on top of the already poor economics of the electrolysis route even with a continuous cheap power supply, as already demonstrated by Shell’s REFHYNE project.
Fascinating link, It doesn’t add up….
Although all the words appeared to be in English, I couldn’t make head nor tail of it, it appeared completely irrational.
Maybe some (they were called fifth columnists once upon a time) would welcome our industry becoming uncompetitive.
“By only allowing green hydrogen they force the high cost production route. It’s surely suicidal for industry to be forced to be completely uncompetitive.”
Sorry to repeat, but this is worth bearing in mind before stressing over the costs of H2 (and other fanciful notions).
The purpose of the exercise is to make an economic case for new nuclear build. If H2 (and others) are expensive and impractical, the government will have its argument that new nuclear build is the more economic (more productive) alternative. So it will commit the UK to the uncertainties of new nuclear developments, which have a record of being unattractive to the private sector for very good reasons (like cost, development and technology risk).
The sleight of hand is to avoid comparing the cost of new nuclear build against the cost of new coal build. This would produce an easy winner, and it wouldn’t be the answer the government is looking for. So new coal build is ruled out by government decree.
China, India and others will continue with new coal build. Relative to these countries, UK productivity will tank.
p.s. Rumblings that even with the state-owned Great British Nuclear Vehicle, the government is having problems attracting private sector involvement in nuclear funding:
https://www.thisismoney.co.uk/money/markets/article-11697759/Two-UK-pension-funds-snub-Sizewell-C-nuclear-plant-plan.html
“the government is having problems attracting private sector involvement in nuclear funding”
Possibly the current ridiculous taxation levels might have something to do with that.
Not to mention regulations
>>current ridiculous taxation levels
The government will be finding it extremely hard to stomach the conditions (guarantees) the banks will be asking for.
Banks will test their appetite to lend using “debt sizing” scenarios of the project investment case. These deliberately focus on pessimistic scenarios to take a view on the risk of default.
Consider what this could mean for nuclear new build (NNB).
NNB is very likely to be late. On current experience, 10 years late is quite plausible, maybe even likely. That could be 10 years or more where missed bank debt repayments compound in the project company, increasing banks to performance risk during operation. This could only happen for so ling before banks would look for some form of call back of the debt – who would underwrite this?
Likewise, NNB has a recent history of large capital cost over-runs. What priority will the banks ask for debt payments over the liabilities of whoever would be committed to underwrite the capital cost over-runs, should they occur?
The technology presently on offer has no meaningful track record of operation, and debt payments are exposed to this risk.
It is very likely that the nuclear liability Funding Plan (one of those oh-so awful regulations) will have first call on project net cashflow. If these payments take precedence over debt payments, that’s just more risk for the banks.
Banks might look for step-in rights if an underperforming project defaults on debt. They will have no appetite to take ownership of an underperforming NNB project.
The above is just a handful of points that spring to mind, and there will be more. They all amount to exposure and none are easy to resolve without defeating the purpose of securing private sector funding for risk management.
It really isn’t a matter of taxation and deregulation. If there is a common theme running through the above risks, it would be technology design and performance risk. It would be “nuclear”.
Astonishing to look back and see that Calder Hall construction was commenced in 1953 and completed in 1956…
I wouldn’t fund a new EPR at Sizewell either. It’s a purely political decision aimed at sucking up to the French. Economically and technically it is crazy – there are much better much cheaper options with proven technology and proven on time, on budget builds. I would not link it to hydrogen though.
Yet KEPCO APR1400 reactors can go from contract awarded to power in 9 years.
Paul: Another mind-blowing story in the DT today:
https://www.telegraph.co.uk/world-news/2023/02/11/climate-change-activist-goes-rogue-releasing-mini-volcanoes/
Mad scientists doesn’t even cover it…
Not “Mad scientists”, just a con man.
But a variation on carbon offsets.
The modern day equivalent of the old Roman Catholic indulgences, and just as much of a scam.
Apart from the obvious economic lunacy of hydrogen manufacture and transport, there remains the real elephant in the room that hydrogen has a massive ozone-layer depletion potential, Leakage of gases in transit is typically estimated at 6 % for natural gas; for hydrogen it will be significantly more, as hydrogen is notoriously difficult to contain. Hydrogen being the lowest-density gas goes quickly to the ozone layer rapidly where it reacts photochemically with ozone.
Ozone depletion is a far greater threat to the world than a degree of warming above the LIA! However, the zealots care not a whit.
Arghh yes the law of unintended outcomes.
Furthermore (if anyone were really interested in greenhouse gases) it is worth pointing out that Hydrogen is also an indirect GG with a “Global Warming Potential” (GWP) of over 6 were CO2 is only 1 according to the IPCC.
Sorry about this, Paul, but the DT is a goldmine today:
https://www.telegraph.co.uk/politics/2023/02/11/leading-net-zero-adviser-conflict-interest-row-sustainability/
Meant to add, it’s about our friend and greaseball, Deben.
That slimy pig Gummer has his snout in more Green troughs than you can shake a stick at, and has had for decades.
Don’t tell me they’ve only just noticed!
And this from spiked-online
https://www.spiked-online.com/2023/02/13/net-zero-is-a-threat-to-energy-security/
Today’s DT also had some encouraging stuff concerning the four outer London boroughs fighting back agains ULEZs, especially Bromley, pointing out that Khan’s statistics for excess deaths are complete nonsense. As I have pointed out previously the numbers are unqualified as to age and co-morbidities and I bet 90% or more of “early” deaths from respiratory ailments are from current or ex heavy smoking. It was also notable from the weekends numerous references to this subject that the MSM are totally confused as to what the LTNs etc are about. The nomenclature refers to “emissions” and most commentators are basing their reports on this meaning CO2. But Khan is very specific that his plans refer to “clean air”, especially particulates. The widely available data on air quality since the 1950s show that we have the cleanest air ever (ecxcept possibly a few inner city hot spots). They can’t even identify who the enemy is!
The “early deaths” are pure scaremongering. Just look at how many old age pensioners there are, many of which started smoking when they were 14 and are still smokers. And of course petrol and diesel vehicles on the roads their entire life.
What all the scaremongers totally ignore is that some people get ill every week despite not doing anything that is “bad for you”, others never including those who do everything that is “bad for you” and the rest of us somewhere in between
Back in the pre-electrical 1960s when industry was mostly run by big steam engines driving lineshafts and Lancashire boilers were the main power suppliers, around 4AM Monday mornings in most big industrial towns literally thousands of the boilers would be lighting up and the low-lying acrid, sulphurous fog had to be experienced to be believed.
Most domestic heating was by open fires burning bituminous coal of dubious quality.
In winter of 1965 Manchester experienced its last great smog and closed down for three days you could stand under yellow sodium lamp and not be able to see it.
And yet us pensioners whose longevity is stressing out the NHS lived through all that.
And Khan says he wants ‘clean’ air!
🤣🤣🤣🤣🤣🤣🤣🤣🤣🤣🤣🤣🤣
What a dolt!
Just add it to the BEV charging infrastructure levy, although that seems to have gone quiet. Just when are OFGEM going to get some balls and start looking after the customers interests. It is absolutely ridiculous that some single mother in Hull (most deprived in UK) on a prepayment meter is expected to subsidise the commercial production of hydrogen and EV chargers.
Remove all subsidies on renewables and let standard commercial investment risks decide whether the project makes sense. I think the result would be none make any sense.
I will refrain from commenting on Grant Shapps but he was on Andrew Neils show last week, and I do not think he answered one question.
OFGEM is flat out pushing the NZ narrative – customer interests are well down the priority list. The background of the CEO is informative:
“Jonathan Brearley became Ofgem’s Chief Executive Officer on 3 February 2020. This follows his previous appointment as our Executive Director for Systems and Networks in April 2018.
He has wide-ranging energy sector experience, having led Electricity Market Reform as the Director for Energy Markets and Networks at DECC.
Prior to this, he was Director of the Office of Climate Change, a cross-government strategy unit focussed on climate change and energy issues, where he led the development of the Climate Change Act. Earlier in his career, Jonathan was a senior adviser in the Prime Minister’s Strategy Unit.”
I believe he is on record as saying that climate change is top priority for OFGEM.
Of course it’s top priority. Has been ever since Ed Miliband’s 2010 Energy Act made it so. Probably more drafting by Brearley and Worthington.
The lunatics are truly in charge of the asylum.
These madcap schemes are indicative of a government (and the wider political class) that’s completely lost the plot over ‘carbon’ and Net Zero.
No scheme is too harebrained, no scheme too infantile, just so long as it ‘reduces carbon’.
Even now the ban on extracting our own on-shore gas supplies is criminally negligent. We can source gas from Norway, Qatar and the USA but absolutely definitely NOT from our own land under our own feet.
Massive export tax revenues (at a time when we desperately need income) is ignored.
Discounted energy costs for UK homes and business registers not a twitch on the Westminster seismograph.
Balance of trade and payments are suddenly irrelevant.
Thousands of actual British jobs for British workers are deemed unworthy.
Truly insane.
Saw a report recently, (correction,2 reports) that said that LPG has 4X or 10X the CO2 of pipe gas because of the energy expended in cooling it to a liquid and also shipping it halfway round the world !
…as long as it gets subsidies, Cheshire Red.
Welcome to the Department of Energy Insecurity.
Virtue signalling gone rogue! How can any politician in possession of the minimum requirement of brain cells (and I don’t for a moment believe the overwhelming majority are lacking, much as they try to prove otherwise) tell us with a straight face that it really doesn’t matter how much CO2 the UK emits as long as it doesn’t come originally from the UK?
Because that is the message they are asking us to swallow. Gas-firing OK as long as the gas comes from somewhere else. Does Richi really believe that?? Is Hunt not capable of understanding that every £ of oil/gas (even coal) that is imported from abroad is a £ he doesn’t need to borrow or screw out of the taxpayer? Seriously?
The old adage, “You can’t make this stuff up–it’s too crazy” comes to mind. The extra levy will not be spent on low-carbon hydrogen, it will be sent on procuring the Magic Unicorns necessary to make the windmills work.
At the moment we are importing 21.4% and getting 21% from “renewables”, of which 12.2% is from wind.
‘At the moment we are importing 21.4% ‘
Is this all from renewable sources ?
Otherwise those in charge need to be imprisoned for crimes against humanity.
Net zero is their aim – we are the carbon they wish to eliminate.
Any politician supporting net zero must be put on trial immediately.
‘… risks of having a standalone net zero department, after it was hived off from the business department ….’
A deliberate act to divorce the real costs from the Net Zero virtue signalling charade.
Perhaps some of the MPs objecting to cessation of the ridiculous Net Zero policy have ulterior motives to protect?
Who cares?
Should that be the case, the enemy of my enemy will be my friend!
Heads up for a laugh.
Guy Martin’s Great British Power Trip
C4 9pm.
Watch as a grinning berk blows up a coal power station and tells us how renewables are cheapest and will save the world.
Yes. I watched the trailers and thought, there was a mad engineer who once entertained us but is now being used by the NZC nutters. I figured he was just too gullible to question the numbers – but so many will believe him.
Might actually be more interesting than I gave credit for. I’ll watch it later.
I shared your scepticism beforehand but there was more realism than I expected. Early on, he states quite bluntly that we can’t rely on intermittent wind and solar to keep the lights on. Visiting Drax, he is plainly sceptical about the renewable claims.
The first episode was actually quite detailed, well researched, and raised a lot of pertinent questions and issues about power production – sensible ones that people reading this blog ask.
It is noticeable that after Guy has made those points the commentary often minimises and dismisses, or it is edited to give the last unchallenged word to, for instance, the Drax man’s dubious justification for burning trees.
I suggest a sizable community, say 10,000 residents, be selected (a lottery? – – – https://en.wikipedia.org/wiki/The_Lottery) – – – to be outfitted with Hydrogen. After 3 years of operation there should be enough data to evaluate the effort.
Certainly, this is not really needed. However, it is always good to learn new things.
Already planned, Redcar or Whitby…
https://www.bbc.co.uk/news/uk-england-tees-64262292
“It would provide electric alternatives for free for homeowners who did not want hydrogen at all, it said.”
I’d go that route.
Careful John!
They probably mean they’ll give you a free heat pump!
Doesn’t Shapps know that hydrogen is NOT a fuel, but merely an energy transport system?
Doesn’t Shapps know that the ERoI of hydrogen is an abysmal ~30%, ie ~70% of the input energy is wasted?
Doesn’t Shapps know that CO2 isn’t the climate control knob?
Doesn’t Shapps know that hydrocarbon fuels and their derivative materials and products literally keep us alive?
Doesn’t Shapps know anything?
Octopus Energy are boasting that they have reduced 150,000 tonnes of plant food with their ‘green’ energy policies.
I doubt Octopus Energy would like the headline “Energy company causes mass starvation”, but the logical goal of their policy is exactly that.
What Shapps doesn’t know, the Heritage Party certainly does. It is all very well making appropriate comments but what is everybody going to do about it? This Party needs people with the knowledge and leadership capabilities to grow and become a real force against the tyranny that is besetting us.
Tax ad ban, tax and ban, tax and ban.
And they are puzzled why we don’t have growth.
Is this the same Mr Shapps that made most people pay for wide cycle lanes that we don’t use, while sitting in traffic jams?The odd thing is that he has an engineering degree.
It’s ALL to do with THE GREAT RESET!
This project to produce hydrogen is part of the EU plan to produce 40 GW of hydrogen by 2030.
According to a Netherlands ISPT report (link below) the cost of a GW hydrogen electrolyser is between 1400 EU/KW (alkaline technology) and 1800 EU/KW (PEM technology).
I calculate therefore that the cost of the planned 10 GW electrolyser will be around £15 billion which works out at £200 per person.
10 GW is 25% of average current demand (40 GW). From where does the Department of Energy Security and Net Zero expect to obtain this extra 10 GW?
I also calculate that at today’s cost of wholesale electricity of roughly around £200/MWhr it would cost £250 per person each year to run it.
Click to access ISPT-public-report-gigawatt-green-hydrogen-plant.pdf
“the EU plan to produce 40 GW of hydrogen by 2030”, which is crazy. You cannot have any GW of hydrogen. It’s not a fuel! It’s not an energy source, only a transport system (and a very inefficient one). It’s like saying they want 40 GW of gas pipe by 2030! It’s nonsensical.
You’re correct of course. I think it is short for (an) electrolyser plant(s) designed to consume power at a rate of 40GW.
ilma630 : Sorry, I think I am wrong. Reading about the UK’s project for 10 GW of hydrogen by 2030 (2 GW by 2025), BEIS make it clear that the 10GW refers to the hydrogen output itself on an HHV basis which BEIS say is 0.07 Kg/s. So the power consumption will be higher than 10 GW – 16 GW with 62% electrolyser efficiency? I don’t see where all this power is coming from. They even have the nerve to include “new nuclear” as a possible power source by 2030!
It is indeed very confusing. While it is acceptable to quote volumes of gas used for energy in terms of their energy content (as is done in monitoring gas flows through commercial pipeline systems for example), and even to convert to an average power, it is completely unclear what they really mean.
40GW continuously over a year is about 350TWh. It would take around 600TWh of electricity to produce it, which is a significant fraction of EU electricity consumption.
If they mean 40GW of electrolyser capacity the next question is what utilisation can they expect. If it is confined to using “cheap surplus” power only, that will be quite low. This is for the UK, but a similar pattern would occur at the EU level
https://datawrapper.dwcdn.net/nZM72/1/
So utilisation might be 25% or less. Which would mean only about 50TWh of hydrogen.
The real purpose of this hydrogen levy is to make gas (whether pure hydrogen or mixed with methane) heating more expensive than electric heat pumps to force the consumer to convert to heat pumps. The advantage of heat pumps is that the electricity needed to run them can be easily controlled via our individual smart meters.