Have your say – David Cockshott

The new majority Tory government has wasted no time getting stuck into energy policy; in their first 100 days of government we have seen significant changes in the renewables sector and pledges to cut red tape and consult on business energy efficiency. But what does that mean for end users, left with short-term uncertainty?

The rising share of non-commodity costs on the business energy bill has been a source of frustration for some time, caused in part by the growing cost of environmental levies and taxes. The greenest government ever might have been an over-statement, but the previous administration had certainly committed to substantial support for low carbon technology: recent figures from the Office for Budget Responsibility indicated that the Levy Control Framework is predicted to exceed its £7.6bn cap by an additional £1.5bn by 2020. To stem the overflowing costs, DECC announced that onshore wind subsidies would be cut ahead of schedule alongside additional measures to reduce renewable support, including an end to Climate Change Levy (CCL) exemptions for electricity from renewable sources.

While the attempts to get to grips with rising environmental costs might be seen as a positive move by some, it’s not all good news. For some businesses, the removal of CCL exemptions could impact the bottom line. While transactional arrangements are not yet finalised, those businesses with green supply contracts could find that suppliers may have to adjust their contracts or eventually pass through CCL costs.

Of course, announcing such changes will impact confidence in low-carbon investment, potentially deterring investors and certainly destroying business cases currently in development. Renewable generators will also feel the pain, with the move expected to impact them by up to £450m in the current financial year with little notice.

If certainty is the pre-requisite for business and investor confidence, the announcement of a new consultation into business energy efficiency taxes to commence this autumn could cause some uneasiness.

To read the full article see the latest September edition of EiBI.