Rolling back green levies

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As the political environment became heated on green subsidies that are required in order to meet climate change objectives, David Cameron responded by promising to “roll back green levies.”

The main points announced by DECC involve a scaling back of the Energy Company Obligation (ECO), which funded energy efficiency measures in less well off people’s homes. This is due to save £30-£35 next year and effectively moves the Warm Home Discount element of bills to the Government/Tax payer through a £12 per year rebate. There is also a £5 reduction in distribution network costs for 2014/15.

To offset the reduction in the ECO scheme the government is offering funding of up to £4000 for energy efficiency measures through a stamp duty rebate on the purchase of properties. Private landlords are also promised support to help with energy efficiency improvements to the “least energy efficient rental properties.”

The government say the total saving on the average energy bill will be around £50.

However, more interestingly, and perhaps importantly, for the energy investment sector there is no planned change to support levels for “existing low carbon energy projects” under the Renewables Obligation, Contracts for Difference or Feed in Tariffs.  Although quite what the Government means by “existing low carbon energy projects” and whether this has implications for any projects that don’t yet exist remains to be seen.

The Government may have succeeded in doing what they had to do to counter the winter price increases before the coming election. However, the impact on bills from new capacity investment supported by the RO/CfDs/FiTs will increase as new capacity is commissioned, so this issue has effectively been shifted to after the election.

Out of interest, DECC says that the average household dual energy bill is comprised of the following:

  • 46% wholesale gas and electricity costs;
  • 23% network costs;
  • 13% operating costs (supplier costs);
  • 8% environmental and social costs;
  • 5% VAT; and
  • 5% supplier profit margin.

For more information, help or advice please contact Andrew Davison on 0191 211 7950.