Renewable Subsidies To Rise By £1.6 Billion This Year

By Paul Homewood

Following the new budget announced this week, the OBR have published the full detail underlying it.

As usual they include the cost of Environmental Levies, which are in essence subsidies paid to renewable energy suppliers via our energy bills:

 

 

 

 

https://obr.uk/efo/economic-and-fiscal-outlook-march-2024/

The cost for 2024/25 will rise to a record high of £11.5 billion , equivalent to over £400 per household. In addition the cost of the RHI scheme, which is funded from general taxation, adds an extra £1.2 billion.

Not all of the extra costs incurred because of policy are included. For instance, there is no mention of the costs of grid upgrades, system balancing costs and constraint payments – all the direct result of increased renewable generation.

One more thing worth pointing out is the projection that CfD costs will decline in 2027/28. There is no logic for this – no generators are likely to drop out of the scheme then, as their 15-year contracts won’t start to expire until will into the next decade. Moreover, subsidies will rise once Hinkley Point starts up.

The OBR may be assuming that some of the offshore wind farms which agreed lower rates will honour their contracts, but this is extremely unlikely.

The only logical explanation is that they expect wholesale power prices to substantially rise in 2027, thus reducing the amount of subsidies paid. This in turn suggests that they expect Carbon Prices to resume their upward march.

Either way, energy consumers will end up being much worse off.