Skip to content

Environmental Levies

January 16, 2020

By Paul Homewood

 

 

Just a quick note to explain how the cost of subsidies for green energy is worked out, after some confusion in yesterday’s post. It is worth clarifying as it often gets queried:

 image_thumb-55

 

The above figures come form the Office for Budget Responsibility, (OBR).

Environmental Levies reflect the costs added to energy bills via what is known as the Levy Control Framework, as opposed to being absorbed into general taxation. As I understand it, by law the government has to declare any costs imposed on consumers in this way as a result of direct government policy.

For 2021/22, the total cost of levies is £11.8bn. But this includes £0.4bn for Warm Homes Discount, which is a discount for low earners from their energy bills, funded as a surcharge on everybody else’s bills.

Therefore, strictly speaking, the cost of subsidies to renewable energy suppliers is £11.4bn, via Feed-in tariffs, Renewables Obligation, Contracts for Difference and Capacity Market.

Although the latter is paid out to non renewable generators to provide standby capacity, Capacity Market payments should necessarily be regarded as just another cost imposed on bill payers by intermittent renewable energy.

Finally, on to the £11.4bn we must add the cost of the Renewable Heat Incentive (RHI), which is £1.1bn. This is yet another subsidy offered to both homes and businesses who install renewable technologies for heating. As this is funded from general taxation, it is not included in Environmental Levies, but in general public expenditure. Instead it is listed just as a note.

27 Comments
  1. Thomas Carr permalink
    January 16, 2020 10:46 am

    Excellent info. Instead of talking about green energy we should refer to INTERMITTANT RENEWABLE ENERGY on every occasion. The blather about what windfarm can supply 46,000 ( or any other figure) ‘homes’ is just that.

    • Joe Public permalink
      January 16, 2020 10:54 am

      Hi Thomas

      ‘Green’ energy also includes reservoir-based hydro and burning biomass, and those are considered to be dispatchable.

      • January 16, 2020 12:05 pm

        Average demand 2019 was ~ 32GW
        Bio ~ 2 GW
        Hydro ~ 0.4 GW

        Wind ~ 5.4 GW
        Solar ~ 1,2 GW

        So 64% of ‘Green’ energy is not dispatchable.

    • Harry Passfield permalink
      January 16, 2020 12:40 pm

      It certainly gets my ire going!

  2. Joe Public permalink
    January 16, 2020 10:57 am

    The subsidies for 2019/20 are £10.3bn; for 2020/21 they’ll be £11.4bn.

    A massive hike of 10.68%.

  3. jack broughton permalink
    January 16, 2020 11:56 am

    Does the OBR data include the cost of stand-by and sub-optimal use of existing CCGT plant and damage done by this mode of operation?

    • mike stoddart permalink
      January 16, 2020 12:46 pm

      I took Paul to say that this was covered by the “Capacity markets” item.
      Is that right?

      • January 16, 2020 2:49 pm

        To some extent, as it pays, for instance, gas power stations to be on standby, when otherwise they might mothball

    • January 16, 2020 2:45 pm

      In simple terms, no

      Also missing is the billions spent on upgrading power lines etc to handle wind output

      • Stuart Brown permalink
        January 16, 2020 5:08 pm

        Also, also missing is the amount we pay to throw away the electricity produced by wind when there is more of it than we can use.

        https://www.ref.org.uk/ref-blog/354-a-decade-of-constraint-payments

        “payments rising from £174,000 in 2010 to a new record cost of more than £139 million. The quantity of electricity discarded in 2019 was also a new record at 1.9 TWh.”

        Lost in the noise, I realise, but I wouldn’t mind being paid that for not doing something. I can safely promise not to put 2TWh of unwanted power into the grid next year, honest! Now can I have the cash, please?

      • Phoenix44 permalink
        January 17, 2020 9:27 am

        I don’t think you can charge excess production from wind as that’s basically costless. What I am not sure is in is the ekdcyricity that is “thrown away” by back-up plants. They are always on and burning fuel even when they do not create or dispatch electricity.

      • Stuart Brown permalink
        January 17, 2020 10:34 am

        Phoenix44 – Constraint payments are real money paid by the government to wind farms (in the UK) for being unable to take the power they are producing at that moment. This isn’t just money that they could have made from power they couldn’t sell. As far as I know, such payments are only made to renewables.

  4. January 16, 2020 12:04 pm

    Average demand 2019 was ~ 32GW
    Bio ~ 2 GW
    Hydro ~ 0.4 GW

    Wind ~ 5.4 GW
    Solar ~ 1,2 GW

    So 64% of ‘Green’ energy is not dispatchable.

  5. Philip Mulholland permalink
    January 16, 2020 12:10 pm

    All taxation is the economic equivalent of friction in a physical machine.

    The higher the friction is between moving parts the less efficient a working machine becomes, and the less beneficial power output is achieved.

    Political interference in the generation and supply of energy is parasitism, pure and simple.

    • Gerry, England permalink
      January 16, 2020 1:49 pm

      Excellent analogy. And what was needed to keep FlyBe solvent? Delaying the bill for the passenger tax!

  6. Ariane permalink
    January 16, 2020 1:14 pm

    Thanks again for your excellent analysis, Paul. Also, a very small business in Edinburgh, has just under £27 to pay per quarter on its npower electricity bill as the ‘Climate Change Levy.’ British Steel, however, has more to pay since it emits lots of carbon dioxide. Good luck to manufacturing, SMEs and all of us who depend on emitting CO2. We’ll need luck from somewhere as folk like Sir David Attenborough prefer all that is wild and non-human – so won’t be wishing us well any time soon.

    • Gerry, England permalink
      January 16, 2020 1:47 pm

      And the steelmaking industry is going bankrupt…..

    • Ian Magness permalink
      January 16, 2020 5:02 pm

      Paul,
      Ariane raises a good point here and I would appreciate some clarification of this issue from someone somewhat more knowledgeable than myself – i.e you!. I have a friend who runs vet’s practice using about £250 of electricity cost per month and he has to pay about £20 on top for the Climate Change Levy (CCL). He asked me to look into it and I found the following wondrous statement on the government website: “Environmental taxes encourage your business to operate in a more environmentally friendly way.” Fantastic! How is a vet’s practice supposed to do this? Just euthanise the patients as they come in?
      Anyhow, my questions are:
      1) does this money go toward anything useful or does it just disappear into the same black hole that almost all other taxation does?
      2) Is the CCL included in your Environmental Levies table above or is this an entirely separate tax?
      3) If the tax is separate, should this – clearly insidious – tax also be included in your own table of “Environmental Levies”?
      Thanking you in anticipation.

      • January 16, 2020 5:36 pm

        No CCL is not included because it is a tax, just as carbon pricing is as well.

        And as someone else commented, it is that black hole it disappears down!

  7. Gerry, England permalink
    January 16, 2020 1:59 pm

    Note that last year’s figures are still a forecast. Good to keep a note of what happens when they cash up.

  8. Bloke down the pub permalink
    January 16, 2020 6:04 pm

    It seems the RSPB have discovered that wind farms kill birds. Who knew?
    https://www.telegraph.co.uk/news/2020/01/15/wind-farms-built-tackle-climate-change-could-final-nail-coffin/

  9. Ian Magness permalink
    January 16, 2020 6:16 pm

    Thanks very much for your reply to the CCL question Paul.
    Whichever way you look at it, both subsidies paid to renewables businesses and levies/taxes paid by individuals or businesses ultimately equate to cash being taken away from people or businesses that might do something useful with it being given to people, businesses and other entities (many governmental or political) that will waste it. And of course the net result with regard to our climate will be “net zero”. So, when next I am asked “how much is all this crap costing us” I think it is perfectly reasonable to add all the levies and taxes up to give a complete picture. Cash accounting, if you will, rather than creative accounting. No doubt some will cry “but taxes go to schoolsnhospitals” and similar but, really, such expenditure should be financed by general taxation, not this rubbish.

  10. Stuart permalink
    January 16, 2020 11:30 pm

    Hmm and where does the continued use of coal on the sly enter into this equation? On the 18th December I went to Liverpool on the trans pennine route from Malton. Over the west side Pennines, maybe getting close to Manchester there was a coal fired station going full bore in the distance it seemed to me- chimney and cooling towers.

    This last week I saw the same at Drax from scaffolding high up on York Minster – chimney and cooling towers full tilt. Note re Drax that built a new biomass generation plant and the same at Ferrybridge- wood pellets and not very green I understand. So it must’ve been the coal plant fired up. Drax has also recently applied to convert said coal plant to gas- opposed by the green lobby of course re CO2 emissions.

  11. Phoenix44 permalink
    January 17, 2020 9:31 am

    These are however simply current cash figures. They take no account of the effects of these policies. Making just about every business in the country pay more for nothing puts up prices, reduces future wages, reduces future investments and reduces future employment. Those costs by now will be vast, and they are both cumulative and compounding.

    • Ariane permalink
      January 17, 2020 9:54 am

      UNEP, EU, Green and UK government policies don’t care about the cost. Historically, the reason for punishing anyone who uses fossil fuels – therefore emitting CO2 – was to stop development, ruin industries and generally create poverty. Until this is acknowledged by the above powers who remain unchallenged about this fundamental ideology, all (or most) protests will be useless.

  12. January 17, 2020 10:47 am

    Once the market was based on what could be afforded by the individual. Marketing offered choice. Experimentation and innovation were powered by commercial advantage. Now we have the creeping spectre of an imposed socialist economic scenario. We are all to follow some centrally imposed diktat at variance with the free market (the capping of energy company charges was surely a contradiction after creating an energy market out of the wreck of state ownership). Rather than having a green energy market that, through invention, becomes competitive with conventional generation, we are favouring an impractical deeply faulted scheme. Mainly because of a centrally imposed contrivance and secondly because innovation is being trumped by false necessity/urgency. The billions being poured into subsidies may, in a previous era, been funnelled into experimentation, research. Already this political manoeuvring is branching out into other ‘common understanding’. Social conformity is being crafted in ‘wokeness’ and the persistent claims of racism, poverty, sexual mores. It will be a race to the line to see whether our lives are ended by AGW, the stultification of markets, or encirclement by embryonic world government proclaiming what is right for all of mankind.

  13. January 17, 2020 10:50 am

    Once the market was based on what could be afforded by the individual. Marketing offered choice. Experimentation and innovation were powered by commercial advantage. Now we have the creeping spectre of an imposed socialist economic scenario. We are all to follow some centrally imposed diktat at variance with the free market (the capping of energy company charges was surely a contradiction after creating an energy market out of the wreck of state ownership). Rather than having a green energy market that, through invention, becomes competitive with conventional generation, we are favouring an impractical deeply faulted scheme. Mainly because of a centrally imposed contrivance and secondly because innovation is being trumped by false necessity/urgency. The billions being poured into subsidies may, in a previous era, been funnelled into experimentation, research. Already this political manoeuvring is branching out into other ‘common understanding’. Social conformity is being crafted in ‘wokeness’ and the persistent claims of racism, poverty, sexual mores. It will be a race to the line to see whether our lives are ended by AGW, the stultification of markets, or encirclement by embryonic world government proclaiming what is right for all of mankind

Comments are closed.

%d bloggers like this: