On Wednesday we tuned in to listen to the budget announcements made by Philip Hammond.
We all got excited by the promises of stamp duty relief and funding for electric vehicles. However, there was no mention of energy policies for low carbon electricity. What Hammond neglected to mention was that the government will not provide any further levies for low carbon electricity until 2025. The government has said this to protect consumers from any further burden caused by levies and their impact on energy bills.
The Office for Budget Responsibility (OBR) have revised down its forecast for environmental levies. It now expects spending under the Levy Control Framework (LCF) to fall a further £0.2 billion to £0.3 billion a year in 2020/21 and by £0.5 billion a year in 2021/22. This is made possible by the reduced spending under the Renewables Obligation and Contract for Difference schemes.
The OBR’s reduction in CfD costs stems from a higher projection for wholesale energy prices, reduction in the total subsidy costs paid to contracted generators and cheaper than expected contracts.
Within the budget the government outlined multiple assumptions. Within these assumptions were the forecasted deployments of different technologies under the various subsidy programmes, such as RO, CfDs and FiTs. The government has forecast that 200 MW of small scale, FiT-accredited solar to be installed in this financial year, with a further 240 MW in the forthcoming year. These forecasts are up to the closing of the FiT scheme, which is set to close to new applicant on 1st April 2019.
This would leave a significant amount of unused capacity within the feed-in tariff deployment caps, currently totalling more than 200 MW. A review of the FiT scheme is yet to be scheduled, but the department is committed to conducting the review before the end of this year. The parliament rises for recess on 21st December, which means the review should enact soon.
The wording of the government’s set of levy controls means that it is opposed to enacting new levies for low carbon power generation but it has opened the door for support frameworks which do not add to subsidy costs on the consumer bills.