The OBR this week published its detailed fiscal outlook following Rachel from Accounts’s Emergency Budget Spring Statement.
Of interest to us is the table for Environmental Levies, which shows that the cost of subsidising renewable energy is set to rocket:
As has been the case for the last few years, the OBR doesn’t include subsidies embedded in Feed in Tariffs, which it used to count as levies. So I have included them in the modified table below, along with the Climate Change Levy imposed on electricity and gas bills for businesses, which are separately shown in Table 3.9:
In total therefore, the various subsidies and levies will cost £17.1 billion this year, rising to £19.8 billion in 2029-30. This will be £5 billion more than last year.
Given that all of this (except the Renewable Heat Incentive) is loaded onto energy bills, it is not credible that bills will fall by £300 a year, as Labour promised.
These projected costs are all either already in existence or in the pipeline. They will go even higher if Ed Miliband starts spraying more money around on his pet projects, such as carbon capture.
Neither do these costs include the massive extra costs of balancing and upgrading the grid required to meet Labour’s Clean Power 2030 objective, as already highlighted by NESO.
One of the OBR’s tables is worth a closer look at:
What this is saying is that wholesale electricity prices will quickly drop back to below £80 per MWh after the current spike.
The strike price for new offshore wind projects agreed last year is around £84 per MWh at 2025 prices, and will likely rise to over £90 per MWh by they time they begin operating in four or five years time.
This demolishes claims that they are cheaper than gas generation.
This article was first published on Paul Homewood’s blog, Not a Lot of People Know That.
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