New Green tax threat in energy bills ‘deal’

November 10, 2013 by  
Filed under Green Energy News

But Ed Davey, the Liberal Democrat Energy Secretary, said the green schemes
had to stay — and signalled that they could be paid for through tax.

He told The Telegraph that he was happy to have a “debate” about how
green energy policies were funded. He said: “We can maybe find there are
other ways of paying for them. There may be ways and means.”

The move by the Lib Dems means that George Osborne will either have to raise
taxes or find money to pay for the scheme, expected to cost £1.3 billion
next year, from already under-pressure public funds through more cuts or

In a significant intervention in the heated debate, Mr Davey also:

• Vetoed the Prime Minister’s own intention to review every green subsidy,
saying that support for wind farms and other “renewable” energy systems
would not be reconsidered;

• Refused to back down on support for wind farms, insisting that more onshore
turbines would be “critical” for energy supplies;

• Said the wind farms, which have attracted huge opposition where they have
been built or proposed, did not affect house prices;

• Attacked Right-wing Tories for “undermining consensus” on the environment;

• Said there has been “massive interest” in new licences for fracking and a
review to be published on Monday will outline a revival in the North Sea oil

The prospect of a tax to pay for green schemes emerged after the last Labour
government introduced the current system of extra charges, which energy
firms add to customers’ bills, known collectively as “green levies”.

The ECO charge pays for energy efficiency policies, such as loft insulation

Other levies subsidise wind farms and other forms of low carbon and renewable
energy which are not economically viable in their own right.

The Big Six power firms, including British Gas and SSE, calculate that the
green levies will add up to £112 to a typical household gas and electricity
bill this year. They say the ECO charge adds £50 to an average domestic

Currently, different energy companies charge customers between £45 and £75 as
a flat-rate levy to pay for the initiative, which they are legally obliged
to deliver.

The Coalition agreed to keep the charges in place as it sought to fulfil an
early promise to be “the greenest government ever”.

However, a succession of above-inflation rises in gas and electricity bills
has led to demands for a review.

Ed Miliband, the Labour leader, increased the pressure on ministers with his
pledge to freeze bills for 20 months if he wins the next election.

Mr Davey said he would reconsider how the ECO scheme and the Warm Home
Discount, which adds an estimated £11 to bills, were funded.

The ECO initiative costs an estimated £1.3 billion a year in boiler
replacements and insulation, while the Warm Home Discount provides rebates
of up to £140 to poor households at a total estimated cost of £1.1 billion.
He said he accepted that the Eco policy could be more fairly funded if it
were paid for from taxation rather than customers’ bills.

“Some of the fuel poverty groups have argued that and we should have that
debate,” he said.

Critics are likely to warn that switching the cost of these measures from
customers’ bills to taxes will simply “hide” the cost of green initiatives
and not reduce the expense.

Government sources said that once a deal was struck to provide funding through
taxes, ministers would seek to cut the cost of delivering the project.

Mr Davey also expressed concern at how the ECO charge differs between firms
and has demanded personal meetings with energy executives, including Sam
Laidlaw, the chief executive of Centrica, which owns British Gas, to press
them to explain why their prices vary so widely.

“Some energy companies seem to be managing to do these relatively efficiently
and cheaply,” he said.

“Others seem to be extraordinarily expensive. We are obviously asking

Senior Liberal Democrats believe that taking the cost of the ECO scheme off
customers’ bills and on to taxes would be a “quick win” for the Coalition
when the Autumn Statement is read next month.

Talks in the Coalition have not yet resulted in an agreed plan on how to
reduce the cost to customers from green subsidies on power bills.

A Tory source said that while it could be fairer to pay for green energy
schemes from taxes, this would not reduce the overall cost to families.

It would require more borrowing “or an increase in taxes”, the source said.

Tory ministers are pushing instead to delay the binding targets for the ECO
scheme, which would “spread” the cost over an extra 18 months. This would
reduce the impact of the policy, the source said.

However, Mr Davey appeared to rule out watering down the Eco scheme in this
way. “There is no way I could support any move which undermined our effort
on either energy efficiency or fuel poverty,” he said.

“We have got to help people with their bills. If we were to pull back on our
ambitions for tackling fuel poverty and energy efficiency, we would actually
be hurting people.”

Mr Davey also flatly rejected David Cameron’s policy of reviewing “every levy”
that is added to customers’ bills, a plan which the Prime Minister
reiterated last week.

“Let’s be clear, we are not reviewing those parts of the bills that support
renewables,” Mr Davey said. These schemes, including “feed-in tariffs” which
pay customers who generate their own electricity through solar panels or
wind turbines, represent “a tiny part of the bill anyway”, Mr Davey said.

In fact, the country needed more wind turbines to play a “critical” role in
supplying electricity to the National Grid in the decades ahead, he said.

In the interview, the Secretary for Energy and Climate Change also warned that
there would be no “cap” on the number of wind farms built on the British

Along with nuclear power, solar energy, and a revitalised North Sea gas
supply, they will help keep customer bills down and “cushion” the country
from rising foreign gas prices in the decades ahead, he said.

Asked whether he was happy for the expansion of onshore wind to continue
unrestricted, Mr Davey said: “It would be odd if central government said to
a community, ‘You know what, you’re going to benefit from this, you’re going
to get jobs from it, you’re going to get lower electricity bills but we are
going to put a cap on it, you can’t have it.’ That would be rather odd.

“Onshore wind, if people follow the planning guidelines, if people can see the
community benefits where people can have lower bills … onshore wind actually
has a really central role to play.

Britain has a lot of wind. It’s our wind.

“We don’t have to import it. It’s clean.”

The minister has clashed with his Tory colleague, Owen Paterson, the Environment
Secretary, over research commissioned by Mr Paterson’s department into the
impact of wind farms on house prices.

Mr Davey’s department has been accused of trying to suppress the report.

However, Mr Davey insisted: “He hasn’t got such a report. There is a proposal
for a joint Department of Energy and Climate Change/Defra report which will
look at those issues. All the analysis we have ever seen is that it doesn’t
impact [upon] house prices.”

He also disclosed that there was “massive interest” in the next wave of shale
gas “fracking” licences, to be announced next year. Shale gas companies
expect to drill 20 to 40 exploratory wells in the next three years, he said.

Mr Davey promised that a review of North Sea oil and gas production — to be
published by the adviser Sir Ian Wood on Monday — would offer a
“once-in-a-generation opportunity” to revive Britain’s offshore fossil fuel
industry for the next 30 years.

However, he warned that even after implementing Sir Ian’s plans, Britain will
still have to import a growing share of its gas.

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