Gas Shipper Obligation (GSO): What it means for UK businesses

As the UK accelerates its journey towards net zero, a new policy known as the Gas Shipper Obligation (GSO) is set to reshape how low-carbon hydrogen projects are funded and, ultimately, how much businesses pay for gas.

While this change supports cleaner energy, it also raises important questions about future energy costs, competitiveness and business planning.

In this article, we’ll explain what the Gas Shipper Obligation is, how it works and what impact it’s likely to have on UK businesses.

What is the Gas Shipper Obligation (GSO)?

The GSO is a proposed funding mechanism designed to support the UK’s emerging hydrogen economy. It will create a levy on licensed gas shippers (i.e. the companies that transport gas through the national network) to help pay for the cost of producing low-carbon hydrogen.

Hydrogen made through clean methods such as electrolysis or carbon capture, usage and storage (CCUS) is currently more expensive than conventional natural gas. To make these new fuels viable, the government’s Hydrogen Production Business Model (HPBM) offers financial support to hydrogen producers through “Low Carbon Hydrogen Agreements.”

Up to now, this funding has come from taxpayers. From around 2027, the GSO will replace that system by introducing an industry-funded levy. This means the cost of supporting hydrogen will be shared across gas market participants and ultimately passed down to end users.

How will the Gas Shipper Obligation Work (GSO) work?

Two models are being considered for the GSO:

1. Volumetric charge: Gas shippers pay based on the volume of gas they transport. This approach links costs directly to gas usage, so larger users pay more.
2. Meter-point charge: Shippers pay a fixed fee per gas meter. While simpler to administer, this option could place a heavier relative burden on smaller businesses and domestic users.

The government has indicated a preference for the volumetric model, as it’s seen as fairer and more closely aligned with the “polluter pays” principle.

What does the Gas Shipper Obligation (GSO) mean for UK businesses?

More expensive gas bills

For many organisations, the most noticeable effect will be a modest increase in gas prices.

The Department for Energy Security and Net Zero estimates that non-domestic gas users could see a 1–2% rise in costs between 2028 and 2037, depending on the final model of the scheme.

While this may sound small, even minor increases can affect budgets for energy-intensive industries such as manufacturing, food processing, and chemicals.

For companies already managing tight margins, it’s another factor to watch closely.

Varying impact on different sectors

The impact won’t be the same for everyone. High-volume gas users will feel the most direct cost increases, but smaller firms could also be affected.

Sectors such as refining, glass and steel are calling for partial exemptions to protect competitiveness against overseas rivals who don’t face similar levies.

Long-term opportunities in hydrogen

While the GSO introduces short-term costs, it’s also designed to unlock long-term benefits. By creating a stable funding route for hydrogen production, it gives investors the confidence to back large-scale low-carbon projects across the UK.

That, in turn, could open new opportunities for businesses in the hydrogen supply chain.

Companies already exploring energy transition strategies or decarbonisation pathways may find this an ideal time to reassess where hydrogen could fit into their future operations.

Balancing cost and climate goals

The challenge for policymakers is to strike a fair balance between supporting clean energy investment and protecting business competitiveness.

As with any energy levy, there’s a risk that costs will be passed along the supply chain to consumers. However, by investing in cleaner fuels today, the UK aims to build a more resilient, low-carbon energy system that benefits businesses in the long run.

What should UK businesses do now?

With implementation expected from 2027, there’s still time to prepare. Here are a few practical steps:

• Review your gas consumption: understand your usage profile to estimate potential cost exposure.
• Factor in possible price rises: build a small buffer into future energy budgets and contracts.
• Engage with suppliers: ask how your energy provider plans to manage and pass through GSO costs.
• Explore low-carbon alternatives: assess whether hydrogen, biomethane, or electrification could reduce long-term risk and improve sustainability credentials.

The Gas Shipper Obligation marks a significant milestone in the UK’s clean energy transition. For most businesses, it will mean a slight increase in gas costs, but also a major opportunity to engage with the growing low-carbon hydrogen market.

By staying informed and planning ahead, UK organisations can not only manage the impact of this policy but also position themselves to benefit from the next phase of the UK’s energy transformation.