Chancellor Rachel Reeves has announced in her Spring Statement that the UK government will remove Climate Change Levy costs from electricity used to produce green hydrogen.
Reeves said that the government is consulting on the best route to do this via legislative changes.
Furthermore, she said that the government would also conduct a wider Climate Change Levy review.
In response, RenewableUK’s director of future electricity systems, Barnaby Wharton said: “We’re delighted to see this reform, which will help to reduce the cost of green hydrogen for businesses and billpayers.
“Our Splitting the Difference report released in January highlighted the case for exempting electricity used to make green hydrogen from the Climate Change Levy as part of a package of measures to cut green hydrogen production costs by 58%, so we welcome today’s announcement by the Chancellor that she will take forward this key recommendation.
“Green hydrogen generated in high-tech electrolysers using renewable electricity has an important role to play in decarbonising sectors like steel, chemicals and shipping, which are hard to electrify.
“It can add vital flexibility to our energy system, as it can be stored and used whenever it’s needed, providing long-duration energy storage which helps to balance and strengthen our energy system by making the best use of the vast quantities of electricity we’re now generating from renewables.”
Wharton added that other measures are also needed to speed up the roll-out of this innovative technology, such as removing barriers to enable green hydrogen producers to co-locate their projects alongside renewable energy generators which already have planning consent to cut costs and reduce delays.
He added: “We also need to see an ambitious strategy to develop a hydrogen transmission network, with pipelines linking Scotland to England and Wales to optimise the availability of green hydrogen.”