Tories scamming consumers

Photo: Frerk Meyer (CC BY-SA 2.0)

Electricity bills would be falling more quickly if it was not for deliberate Government action to divert funds away from consumers, reports Dave Toke 

Back in November, the Government introduced a windfall tax on renewable energy and nuclear generators. They did this on the grounds that many non-fossil generators are selling their electricity generation at very high market prices which match the sky-high price of electricity from gas-powered plant. The only generators who are not being taxed in this way are smaller generators as well as renewable energy generators operating on fairly recently issued fixed-price contracts (which means they only receive a stated price for each unit of power that is generated). These recently started schemes will be paid much lower prices. But the bulk of renewable generators and all nuclear generators are being paid prices that are well in excess of their costs and ‘normal’ profit levels.   

The Government responded to this by imposing a windfall profits tax on the larger schemes which means 45% of the excess profits above a certain price (£75) per MWh are taken by the Government through the windfall tax. Which is the point. This money is not being returned to hard-pressed energy consumers through reduced electricity prices. It has been estimated that the Government will earn around £14 billion over around five years under this windfall tax. That represents about £500 per energy consumer which is not actually being paid to energy consumers but is instead going to the Treasury. Now of course, the Government needs revenue; but at the moment, with average energy prices that the consumer has to pay being £2,500 per year, consumers need every little bit as well.    

The windfall tax is unpopular with the non-fossil electricity generators. They say that the 45% windfall tax is higher than what oil and gas companies have to pay in windfall tax (35%) and that these taxes will harm investment in new plant. Now, I do not believe that investment in new renewable generation will be affected. That is for the simple reason that almost all new large-scale renewable energy is funded out of fixed-price contracts which are not affected by windfall profits, and for which there are many investors queuing up to fund. Besides which, the windfall tax still leaves the generators making a lot more money than they have done in ‘normal’ times! But it is still true that the non-fossil generators are being charged higher windfall taxes than the oil companies. That should be remedied by increasing the windfall tax on the oil companies, like Shell and BP, making record profits! Moreover, the money should go to the energy consumers, not the Treasury. This will have the effect of reducing the difference between electricity and gas prices, thus making heat pumps a more attractive investment for homeowners.  

What the current energy price crisis does clearly demonstrate is that renewable energy funded by fixed-price contracts is a much better option to protect energy consumers’ interests compared with very expensive fossil fuels or nuclear power. New wind and solar farms are by far the cheapest options for new schemes. The strange thing is that the Government is not doing more to issue more fixed-price contracts for new wind and solar farms. Indeed, the Government, despite recent pronouncements that it is loosening restrictions on onshore windfarms, is in fact still keeping a lot of these restrictions in place. It is being very slow in issuing new licenses for new offshore windfarms as well.  

A report has been published recently by the campaign and research company 100percentrenewableuk which says that the Government can save huge amounts of money by aiming for 100% renewable energy (RE) (energy not just electricity) for the UK. The report says that a 100% RE solution for the UK will save over £100 billion by 2050, compared to the Government strategy for net zero which includes nuclear power and carbon capture and storage. The report was done by expert modellers from LUT University in Finland. The modellers also included (in the 100% RE model) the costs of inter-annual storage and equipment needed to provide power when there is not enough renewable energy on hand. This includes green fuels made by generation from wind power which is then stored. When there is not enough wind, the carbon-neutral fuel is then used to produce power from standard gas generators to cover periods when there is not enough wind or sun. More details can be seen at the website

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