As we enter the New Year, the British public faces a perfect storm of cost of living pressures: rising inflation and property prices and — perhaps most serious of all — rocketing energy costs.
According to Ofgem, households are paying an average of £1,277 for their gas and electricity — a figure sure to rise sharply over the coming months as increases in wholesale gas and electricity prices feed through into domestic bills and the Government’s price cap is raised.
This is where green stealth tax comes in. A fat 15.3 per cent — £195 a year — goes on ‘environmental and social costs’. On electricity bills alone, it’s a huge 25.5 per cent.
This covers a bewildering and ever-growing number of green schemes — some of which are anything but.
According to Ofgem, households are paying an average of £1,277 for their gas and electricity — a figure sure to rise sharply over the coming months as increases in wholesale gas and electricity prices feed through into domestic bills and the Government’s price cap is raised
Renewables Obligation
This was the original, underhand scheme which forced consumers to subsidise renewable energy at a cost of £6.3 billion a year, paid by both domestic consumers and business users of electricity.
The Renewable Obligation Certificates are required by energy suppliers to purchase certain amounts of Renewable Obligation Certificates for each megawatt hour (MWh), of electricity that they sell to consumers.
This scheme, which was established in 2002, has been closed to any new generating stations in 2017. However, consumers still pay to cover contracts from the past.
Generators received 20-year contracts. This means that the scheme will continue to be paid for by consumers until 2037.
The result of the policy is that wind and solar farms generate so much electricity on windy and sunny days that in 2020 they had to be paid £282 million in ‘constraint payments’ to turn off their turbines.
Contraventions
The Renewables Obligation was replaced in 2017 by this new scheme. Operators of qualifying renewable energy plants (nuclear power stations are eligible) are guaranteed a ‘strike price’ for every MWh of electricity they generate.
The Low Carbon Contracts Company is a public entity that makes up any difference in the electricity wholesale market rates below the strike price.
In the most recent auction in September, the Government offered £265 million of subsidies. The bill eventually falls to consumers, it is obvious.
Climate Change Levy
This is a straightforward tax on the burning of fossil fuels — paid by owners of gas and coal-fired power stations, and other industrial users.
The levy is 46p for every kWh of gas and 78p for electricity generated by fossil fuels, and raises £2 billion annually.
Green Gas Levy
As if gas-fired power stations — which still provided 35.7 per cent of our electricity in 2020 — were not taxed highly enough, the government has just dreamed up another levy, designed to subsidise the development of ‘biogas’: a fuel derived from vegetable matter which can be fed into the gas grid. This scheme will be in effect from the spring.
Feed in tariffs
The Climate Change Levy is a straightforward tax on the burning of fossil fuels — paid by owners of gas and coal-fired power stations, and other industrial users
These charges are paid by owners of domestic solar photovoltaic panel systems to produce electricity. Some lucky homeowners who bagged the early rates are receiving 50p for every kWh of electricity they generate — about four times the normal consumer price.
They get paid, even if the electricity is not being fed into the grid.
In 2019, £1.5 bn was paid out in feed-in tariffs, swelling consumers’ bills. These tariffs have been abolished for new domestic installations, but the ones applied ten years ago were valid for 25 years — so consumers will be funding them for many years to come
Capacity Mechanism
The subsidy is for owners of electric storage and generating units that can be quickly brought onstream to meet a shortfall in wind or solar power.
In 2014, the government launched the scheme to encourage embryonic energy-storage.
But gas and even coal power stations have been paid eye-watering sums to generate electricity when there is a shortage from renewable sources — at one point in November, coal and gas plants were paid £2,000 per MWh to make up the shortfall — 40 times the usual market price.
With an annual cost of £1.2 bn, this is a horribly expensive consequence of having too much intermittent generating capacity.
Warm Home Discount
This pays out grants of £140 to 2.2 million low-income households. The £300 million cost is added to the bills of other consumers, so it’s a welcome relief for the less well-off but yet another charge on those who don’t qualify.
Energy Company Obligation
This compels energy companies to subsidise work to improve homes’ efficiency, by installing insulation. These grants can only be granted to households with low incomes and/or on benefits.
The Boiler Upgrade Scheme is yet another new scheme beginning this spring which will provide £5,000 grants for households to replace their oil and gas boilers with electric heat pumps
Other households don’t qualify for help but they are compelled to fund the scheme through their energy bills to the tune of £640 million a year. There are many signs that this scheme has paid too much for poor work.
Boiler Upgrade Program
This is yet another new scheme beginning this spring which will provide £5,000 grants for households to replace their oil and gas boilers with electric heat pumps — but many experts estimate a new air-source heat pump system will cost on average £10,000, including installation. Yet another burden on households that won’t achieve its objectives.
Smart meters
No prizes for guessing who pays for the £3.2 bn rollout of ‘smart meters’, which are meant to educate us about our energy use and cut our bills.
The meters are installed by energy companies, who pass the costs on to consumers. According to the Government, each electricity and gas meter costs £88 to install.
But it isn’t a one-off cost — older meters will have to be replaced soon because the government plans to switch off the mobile phone frequencies on which they operate.
No prizes for guessing who pays for the £3.2 bn rollout of ‘smart meters’, which are meant to educate us about our energy use and cut our bills
The costs don’t end there. A variety of green programs are available that are supported by general taxes.
Domestic Renewable Heat Incentive
A subsidy scheme for green central heating systems, which pays owners of heat pumps and biomass boilers up to 18.8p for every kWh hour worth of heat they generate — thus perversely rewarding people for turning up their heating.
But the scheme, which cost taxpayers £144.6 million in 2020/21, promotes biomass boilers and ground source heat pumps that are suitable only for large homes — and so is mostly a handout for the wealthy.
Rewilding
We may no longer be part of the EU’s wasteful Common Agricultural Policy (CAP). Yet the Government continues paying £3 bn a year in agricultural subsidies.
If the subsidies were going to increase food security, that would be one thing. Yet much of the money has been committed to achieving the opposite: taking land out of production so it can be ‘rewilded’ — making us even more dependent on imported food.
These programs are basically handouts for wealthy landowners who want to establish private nature reserves. In the meantime, our ability to feed ourselves is decreasing. Britain produced 78% of all food in the country between 1984 and 2021. That number was 60 percent in 2021. It looks like it will drop to just 60% with rewilding.
Ross Clark’s satirical novel on climate change, The Denial, is published by Lume Books.