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Increasing Energy Levies and Subsidy Costs

british energy costsThe Energy Cost Artifice

Climate Change Levy (CCL), Contracts for Difference (CFDs), Renewables Obligation (RO), Renewable Heat Incentive (RHI), Feed in Tariff (FIT), the list goes on.

The levies and subsidies attached to the invoices of business electricity customers are growing at an inexorable rate.

Already the cost of these environmental and social obligations make up nearly a quarter of the average energy bill.

Yet these costs are forecast to double by 2020 and treble by 2030.

The quid pro quo is supposed to be that the impact of such policies and ‘investments’ will be to increase the efficiency of energy usage and production and that the benefits will “outweigh” the costs of the schemes.

That expectation, doubtful in the domestic energy market is frankly ridiculous in the business energy market.

For years the focus in the energy market has been on the cost of the raw energy commodity being the big worry, with fluctuations in that price driving volatility and directly impacting retail prices.

But now, with the energy cost on average contributing just 50% of the price of energy even an unprecedented fall in the wholesale cost will be masked by the ever-increasing levy burden being placed on UK energy customers.

Investing increasing numbers of subsidies into new and otherwise uneconomic renewable energy sources, at a time of gas gluts, benign energy prices and plummeting oil costs is delivering the perverse market behaviour of an artificial floor of energy costs in order to deliver a far off dream of a world after fossil fuels.

Oh for the market to be unfettered with such financial instruments and such financial benefit accumulating to customers and not generation plant operators.