My Lords, I will start by addressing Amendments 18 and 19, which the noble Lord, Lord Lennie, and the noble Baroness, Lady Blake, have retabled from Committee. I thank the noble Baroness, Lady Worthington, for her contribution. She requested further detail; I will provide clarification in writing, if that is okay with her.
These amendments seek to ensure that funding for the hydrogen production business model can be provided through the Consolidated Fund. They also seek to restrict where a levy may be placed, removing the option for levying energy suppliers and requiring that a levy could be placed only on gas shippers. They are intended, I assume, to take responsibility for levies away from households.
The powers in the Bill already enable Exchequer funding of the hydrogen production business model,
which will initially be Exchequer-funded. It is therefore unnecessary to include additional provisions that enable the business model to be funded through the Exchequer.
The proposal in these amendments to require that the levy could be placed only on gas shippers will limit options for the levy design, with possible implications for its costs and ultimate impact on consumers. There is no such thing as a free lunch. A gas shipper levy would be a completely novel scheme, with administration and set-up costs that could be considerably higher than those required to implement a supplier levy; this is well understood.
The Government have set out their intention not to levy gas shippers in the near term. Levies on energy suppliers have been used in the past to support the deployment of low-carbon electricity and increase the proportion of green gas in the gas grid. These levies are well understood by the private sector. By taking a similar approach with the hydrogen levy, we can help provide investors with the confidence they need to invest in low-carbon hydrogen production projects and support the delivery of our 10-gigawatt production capacity ambition.
By seeking to ensure that the levy could be placed only on gas shippers, these amendments appear to try to protect energy consumers from the costs of a levy. However, as I outlined when they were tabled previously, we anticipate that any costs associated with a levy on gas shippers would ultimately be passed on to energy consumers in a very similar way to levies on energy suppliers. As I say, there is no such thing as a free lunch. It is the opinion of all the policy analysts that it is unlikely that the amendments would have their intended effect.
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I recognise the concerns about consumer energy bills, which the Government take extremely seriously. We have given an enormous amount of financial support throughout the winter to try to keep bills as low as possible and are committed to helping ensure that the costs of the UK’s energy transition are fair and affordable for all consumers. The Government continue to focus on providing robust support for energy consumers, including through the energy price guarantee, the energy bills support scheme, the energy bills relief scheme and the energy bills discount scheme. Alongside providing support for households and businesses, the Government are working to help ensure that energy bills remain affordable in the long term. Our exposure to volatile global gas prices underscores the importance of our plan to build a strong, homegrown low-carbon energy sector—something this levy is directly aimed at achieving. I am disappointed that the Opposition seem to want to undermine that aim.
I remind noble Lords that the provisions in this Bill will not immediately introduce the levy and that any decision to do so will take into account all relevant considerations, including affordability of energy bills.
Finally, I turn to Amendment 17 from the noble Baroness, Lady Liddell, and the contributions from the noble Baroness, Lady Worthington. I again reassure noble Lords that the Government recognise the need for robust standards on producing low-carbon hydrogen to support the UK’s net-zero targets. The intention of
the definition in Clause 61(8) is to ensure that support under hydrogen production revenue support contracts may be provided only in respect of low-carbon hydrogen production which contributes to our decarbonisation ambition.
Clause 61(3) places a duty on the Secretary of State to make provision in regulations for determining the meaning of “eligible” in relation to a low-carbon hydrogen producer. The Government plan to consult on our approach to these regulations shortly; I would very much welcome the contribution of the noble Baroness, alongside those of industry leaders.
The low-carbon hydrogen standard is set out in guidance. We expect it to be updated over time to ensure that it remains fit for purpose and reflects our growing understanding of how new technologies work in practice, including how hydrogen production interacts with the broader energy system. We therefore do not consider it to be the best approach to make express reference to that guidance in primary legislation.
With a focus on investor confidence, our current approach means that the primary legislation provides a clear direction of travel, regulations—which Parliament will of course have the opportunity to scrutinise—and a significant degree of certainty about eligibility, which will provide prospective investors and developers the clarity and transparency they need to bring projects forward. The approach currently set out in the Bill makes the best use of the primary legislation, regulations for setting eligibility, and guidance which can be more responsive to the evolving nature of the low-carbon hydrogen standard.
To respond to the question that the noble Baroness, Lady Worthington, asked me: these regulations are purely about passing on the benefit of payments made to levied market participants and to their customers, not about who is to be levied or exemptions. Decisions regarding the detailed levy design, including in relation to exemptions, will of course be made in due course.