Latest news with #ContractsForDifference
The Independent
17-07-2025
- Business
- The Independent
Reform puts power companies on notice over clean energy plans
Reform UK has informed major wind and solar developers that it would terminate their access to the Contracts for Difference (CfD) scheme if the party comes to power. Deputy leader Richard Tice sent a formal notice, warning companies that participating in the upcoming CfD auction (AR7) would be at their own risk. The CfD scheme currently guarantees renewable energy developers a fixed price for electricity, insulating them from market volatility and encouraging investment. Climate analysts warned that scrapping the scheme would deter investment, jeopardise British jobs, and increase the UK's reliance on foreign gas. Labour criticised Reform UK's position, stating it would discourage clean energy investment, threaten jobs, and put the nation's energy security at risk.
BBC News
16-07-2025
- Business
- BBC News
Lib Dem leader Ed Davey backs 'pot zero' plan to cut energy bills
The Liberal Democrats have backed a plan to household energy bills by changing how new renewable projects are paid plan, dubbed "pot zero" by researchers, would see greater use of contracts where ministers negotiate a guaranteed price with renewables Sir Ed Davey said the proposals could help break the link between electricity and wholesale gas prices, halving bills by 2035 in combination with other Secretary Ed Miliband has already started a switchover process, but the Lib Dems want to see this accelerated to include all renewable energy generators. Sir Ed pioneered Contracts for Difference (CfD) when he was energy secretary in the Conservative-Lib Dem coalition government that came into power in work by guaranteeing a set price for electricity – known as a strike price – that generators receive per unit of power output, in the hope of encouraging private companies to invest in new electricity prices are above the price set, the companies pay the excess back to energy suppliers, which should help to cut bills. If prices fall below the guaranteed price the energy suppliers - and customers - pay the company the 15% of the UK's renewable energy generators are currently on CfD contracts since their introduction in remaining 85% are on Renewables Obligation Certificates (ROCs), which tie electricity to gas prices, and then add a subsidy on Lib Dems are backing a plan from researchers at the UK Energy Research Centre (UKERC) under which existing renewable schemes could enter "pot zero" auctions for fixed price contracts. 'Manifestly unfair' Speaking at an Institute for Public Policy Research (IPPR) event, the Lib Dem leader said the system needs reform because "97% of the time in 2021, the cost of electricity was set by the price of gas".He said: "It means we're all paying that higher gas price in our bills, even though most of the energy we're using comes from much cheaper, renewable sources. "Not only is that manifestly unfair, but it is also undermining public support for the investment we need in renewable power."So we have got to break the link between gas prices and electricity costs."The party argues that by 2035, this and other policies could knock around £850 off the typical household energy bill of £1,720, made up of:£200 a year from the UKERC "pot zero" plan, assuming it saves around £15bn £30 a year from extending the life of CfDs to 25 years, from the government's current plan for 20 years, according to climate change think tank E3Ga £250 reduction in bills for the average household with a gas boiler by 2035 due to more electricity being generated from renewables, according to the Climate Change Committee's Seventh Carbon Budget£180 a year by improving energy efficiencyconsumer savings of about £200 a year from more flexible energy use and making use of lower off-peak tariffs, according to Cornwall Insights UK-EU cooperation would allow more efficient electricity trading and reduce wholesale prices, according to Energy UK, saving an average £10 annually Responding, Miliband said securing better outcomes for consumers was already at the heart of Labour's approach, and switching to CfDs was already government has agreed to expand the number of clean energy projects that can bid for contracts at competitive prices, from next said: "We need to go further and faster to make Britain a clean energy superpower, end our reliance on volatile global gas prices, and make working people better off with homegrown power we control."These reforms will give developers the certainty they need to build in Britain, helping deliver more clean power projects and supporting thousands of jobs – all part of the mission to bring bills down for good through our Plan for Change."He added the move would help his department put the UK on track to generate at least 95% of its power from clean sources by 2030. Sign up for our Politics Essential newsletter to read top political analysis, gain insight from across the UK and stay up to speed with the big moments. It'll be delivered straight to your inbox every weekday.
The Independent
15-07-2025
- Business
- The Independent
Offshore wind farms to be allowed to apply for contracts before planning consent
Offshore wind farms will be able to apply for energy contracts while they are still waiting for full planning consent, the Government has announced. The plans are part of a raft of reforms launched by the Department for Energy Security and Net Zero (Desnz) to help the Government reach its ambitious 2030 clean power targets. Energy secretary Ed Miliband said changes to Contracts for Difference (CfD) rules will give developers 'the certainty they need to build in Britain' and invest in more clean energy projects. Auctions for the CfD scheme see developers bid to secure a fixed price contract for what they can charge for the renewable power they generate. This system helps to protect them from market volatility, incentivising investment in new wind and solar farms. Earlier this year, the Government launched a consultation on the flagship CfD scheme, including proposals to remove planning barriers. It has now given the green light to changes to the scheme ahead of the next planned auction process, Allocation Round 7 (AR7), which is due to open in August. Officials have said this will include increasing the length of contracts from 15 years to 20 years for offshore wind, onshore wind and solar projects. It said this is intended to spread out the costs of energy projects over a longer period and potentially reduce costs for consumers, while also improving investors confidence. Changes will also include allowing offshore wind projects to apply for a contract while awaiting full planning consent, in a bid to reduce completion times. The department will also change how budgets are set and published to allow the energy secretary to view developer bids before setting his final budget. Mr Miliband said: 'We need to go further and faster to make Britain a clean energy superpower, end our reliance on volatile global gas prices and make working people better off with homegrown power we control. 'These reforms will give developers the certainty they need to build in Britain, helping deliver more clean power projects and supporting thousands of jobs – all part of the mission to bring bills down for good through our plan for change.'
Yahoo
17-05-2025
- Business
- Yahoo
How net zero made Ed Miliband the ‘dark lord of high-cost Britain'
Ed Miliband has a problem. While his net zero crusade has long promised cheaper energy for households, a new report this week will point to a wildly different reality. According to analysis by consultant Kathryn Porter, green levies on energy bills will hit £20bn by the end of the decade. Staggeringly, this is up from £5bn in 2015, as the vast cost of Miliband's radical clean energy ambitions rapidly adds up. As part of Porter's report into green levies, The True Affordability of Net Zero, she claims the renewables obligation scheme – which is responsible for supporting wind farm construction – is alone adding £7.8bn a year to power bills. That is despite it being closed to new entrants seven years ago. Its successor, the Contracts for Difference scheme (CfD), is adding another £2.3bn, she says. The scale of the increase in levies over the past decade has alarmed many in the industry who question whether Miliband has a democratic mandate to raise such huge sums via a levy system that few consumers understand. 'If this money was being raised through taxation, it would be scrutinised by the Treasury, the Office for Budget Responsibility, and by voters at general elections,' says Porter. 'But instead, Miliband is taking these subsidies from the pockets of consumers and giving them to renewable generators – without ever having had to win approval for the idea in an election. 'This mattered less in the past because the amounts were much smaller, but they have become far too large to stay in the shadows.' As part of her analysis, Porter analysed 10 levies that are eventually added to the bills paid by households and businesses. She argues that the imposition of such levies is what has led to the UK paying the highest industrial electricity prices in the world, as well as the fourth-highest domestic power prices. 'The costs are paid by consumers based on policy choices designed to support renewable generation and the drive to net zero,' says Porter. The relative lack of scrutiny applied to such levies worries other energy experts too. Tom Smout, a leading analyst at energy specialists LCP Delta, says: 'Energy levies are central to the economy but are mostly not counted as taxes so they are excluded from the Government's main balance sheets. 'Taxes are treated differently. They show up in all the government accounts and are scrutinised by the Treasury and the Office for Budget Responsibility. And both those organisations tend to favour progressive taxation because it frees up people's money and promotes growth.' Renewables also have other hidden costs that appear on bills, such as connection and network fees. A gas-fired power station, for example, needs far fewer cables and substations to connect to the grid than the multiple wind farms needed to generate the same output. Consumers subsidise the cost of those cables and substations via the network charges added to bills. Wind farms also generate curtailment costs if they have to be switched off, while there are balancing costs to compensate for the intermittency of wind. Those charges, estimated at over £1bn last year, are also added to bills. All of which means that Miliband's argument that net zero will reduce bills by £300 by 2030 is looking increasingly shaky. Chris O'Shea, chief executive of British Gas owner Centrica, reinforced that point this week when he warned politicians against claiming renewables would cut bills. The shift to renewable power 'will not materially reduce UK electricity prices from current levels', he said. 'They may give price stability, and avoid future price spikes based on the international gas market, but they will definitely not reduce the price.' O'Shea's analysis centred on the role of one particular levy, the CfD system, under which the Government guarantees developers an inflation-linked minimum price for each megawatt hour of electricity they produce. That subsidy has added £7.8bn to bills since it was introduced in 2017, according to the Renewable Energy Foundation (REF). In a separate report, it warned that as more wind, solar and other low-carbon energy is added to the system, those costs could hit £11bn a year. John Constable, REF director, says Miliband's oversight of such huge levies had made him the 'dark lord of high-cost Britain'. He compared his policymaking to that of Rachel Reeves, whose spending decisions are scrutinised within an inch of their life. 'The Department of Energy Security and Net Zero has less absolute power, but it operates in the shadows where few can see what it is doing, meaning it can transfer wealth with what amounts to impunity,' he says. Such comments pose an awkward question for Labour. Miliband has repeatedly promised that the shift to clean energy would save money, claiming that Britain will avoid another energy crisis by ending its reliance on fossil fuels. But gas prices have fallen in recent months and, with the world facing a glut of gas in the next few years, will probably fall further. That means it is the levies attached to renewables that will be to blame for keeping Britain's electricity prices among the world's highest. Dieter Helm, professor of energy policy at Oxford University, warned about the growing impact of energy levies in a recent speech 'Levies, what I would call subsidies in our energy bills, are already about 25pc of the total for consumers,' he says. 'This isn't just analytics or neat little intellectual points. This is really serious. 'Because not only does it undermine the growth mission but driving up energy prices does not seem to me to be a good way of maximising competitiveness, particularly against the United States and China. It's true for much of Europe too, but it's worse here.' But if accelerating the drive to net zero meant more levies and higher bills, why did Labour and Ed Miliband target 2030 for decarbonising the grid? Prof Helm believes it was a deliberate political ploy. 'What the Government has done, and it seems to me, to be a deliberate policy, is to try to use net zero as a wedge between Labour and the Conservatives and everybody else, apart from perhaps the Liberal Democrats,' he said. 'It's been deliberately designed to be divisive, to divide lines. That's what the spin is all about. Well, that's really bad news for investors and for the continuity of climate change policy in the UK. 'Energy and climate policy is long-term. If you decide to set a new deadline of 2030 for net zero electricity because the Conservatives had 2035 as their target, then you have to pay whatever it costs to achieve that target.' If he is right, then the levies already buried in our bills are partly the product of short-term politicking rather than long-sighted investment policies. And it's Britain's consumers and businesses that will pay the price. The politicking has, however, worked up to a point. The Conservatives, only just out of a government that was firmly committed to net zero, have done a complete about-turn. Kemi Badenoch, the leader of the Opposition, has pronounced that net zero is now unachievable by 2050 and insists that cheap energy must come first. Claire Coutinho, the former energy secretary, said: 'We committed to no new green levies in the Conservative manifesto. The temptation for a Labour Government trying to hide the costs of net zero is to pile all the hidden costs on to people's energy bills. 'This is completely self-defeating, as it will just cripple British industry and slash household incomes. It's the exact opposite of the £300 off bills that Ed Miliband promised voters at the general election. That's why we've said that cheap energy must come first. And lots of it.' But what Miliband may not have expected when announcing his net zero plan less than a year ago was the rise of Reform. Nigel Farage and his deputy, Richard Tice, see energy prices and the rollout of pylons, cables, turbines and giant solar farms on England's green shires as a key campaigning issue. Tice, energy spokesman for Reform, said its success in the recent county council elections stemmed from opposition to net zero, suggesting that Miliband may have badly miscalculated. 'Green levies hit the lowest paid the most, as this group has the least margin for change,' he says. 'New levies are set to be added to those we already have, suggesting that bills will go up, not down. 'They are all a hidden tax which voters increasingly see as lacking scrutiny and accountability. And they are voting accordingly.' Even so, Miliband has so far indicated he will stick with his green levies. An Energy Department spokesman said criticism of the levy system was 'categorically false, ignores the benefits of clean power and significantly overestimates the costs of renewables'. 'Levies drive investment in renewables and other generation technologies, which will secure Britain's energy independence and protect bill-payers from future energy shocks,' they added. However, the Energy Secretary can't escape the growing criticism. Matthew Chadwick, at Cornwall Insight, says: 'The current structure is now increasingly out of step with our net zero ambitions. 'As we move to decarbonise the energy system, we're asking people to switch to electricity, yet the current system means those who do so often face higher bills because they're paying policy costs on both their heating and everyday electricity use. 'This penalises those who don't have access to the gas grid and discourages the uptake of low-carbon technologies like heat pumps and electric vehicles.' Constable, of REF, is more blunt: 'The net zero undertaking is without doubt the single largest intervention in the British economy since the Second World War, and yet no one has even a glimmering of its total costs and opportunity costs. 'We are flying blind.' Broaden your horizons with award-winning British journalism. Try The Telegraph free for 1 month with unlimited access to our award-winning website, exclusive app, money-saving offers and more.
