Give Britain A Break: Suspend £15 Billion A Year Energy Policy Costs To Help Households and Businesses

  • Date: 24/03/20
  • Press Release, Global Warming Policy Forum

London, 24 March: The Global Warming Policy Forum is calling on the Government to suspend all energy policy costs for the duration of the pandemic to relieve the burden for households and businesses during this unprecedented crisis.

* A civil emergency requires firm government measures in all areas and energy is no exception.

* Britain cannot afford high-cost gas and electricity as we defend our society and families against Covid-19.

Using data from the Office Budget Responsibility (Economic and fiscal outlook – March 2020 [1] , March 2019 [2] it can be seen that direct subsidies to renewables, as well as the Climate Change Levy, and the EU Emission Trading Scheme, together will cost consumers about £15 billion over the coming year, unless government acts without delay.

These carbon costs will be felt by households both directly and indirectly:

* directly on their electricity bills, where prices are nearly 40% higher than they would be in the absence of policies, according to government’s own estimates [3].

* indirectly through the general cost of living, as commercial and public sector consumers pass their own costs on to households (if supermarkets pay more for electricity to refrigerate milk, they must recover this cost at the checkout).

One leading supplier of electricity for commercial consumers estimates that low-carbon policy costs now account for about 40% of a typical bill to their customers (Haven Power, Your Guide to Third Party Costs (February 2020) [4].

Such costs can only add to the difficulties faced by businesses already struggling with collapsing demand. To these extraordinary costs should be added the additional grid costs of managing uncontrollable electricity generation.

Policy impacts on system costs are opaque, but where numbers are known they are high. The notorious “constraint payments”, mostly paid to Scottish windfarms for reduction in output, came to £130 million last year alone and this year amount to a staggering £84 million, £1m a day.

Electricity costs are of particular importance at this time since so many British people and families are confined to their homes, some of the most vulnerable dependent on electric heating.

Nearly all of the £15 billion a year cost can be saved for the duration of this emergency by the expedients of suspending the majority of renewables subsidies (Renewables Obligation, Contracts for Difference, and FiT, excepting only payments to small domestic generators) and the Climate Change Levy (CCL) and the Emissions Trading Scheme (ETS).

Further savings would arise from reduced system costs.

GWPF director, Dr Benny Peiser said,

Continuing to force consumers to stay at home and use high-cost energy in a time of unprecedented crisis will cause severe personal hardship and needless economic damage. Government must act immediately to suspend these burdens for the duration of the coronavirus crisis.”

[1] https://obr.uk/efo/economic-and-fiscal-outlook-march-2020/

[2] https://obr.uk/efo/economic-fiscal-outlook-march-2019/

[3] https://www.gov.uk/government/publications/estimated-impacts-of-energy-and-climate-change-policies-on-energy-prices-and-bills-2014

[4]https://assets.ctfassets.net/zb2jbbsrxzqq/4ibOWMWb4syKwYoUIGYuyo/65cb8a6ca2f6b9d2c5e6d5275c656f6f/HP036_TPC_Guide.pdf

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