The government has signalled there will be no new low carbon electricity levies until 2025.
In its update of the Levy Control Framework (LCF), announced in today’s (22 November) Budget, the government said the move will shield consumers from increasing energy bills.
The Budget states: “In order to protect consumers, the government will not introduce new low carbon electricity levies until the burden of such costs are falling.”
Based on current forecasts, it says this will not happen until the middle of the next decade.
Today’s announcement will see all existing commitments respected, including the £557 million allocated for further Contracts for Difference (CfD) auctions in the recently published Clean Growth Strategy.
The review, outlined in a Treasury document entitled Control for Low Carbon Levies, also states there will be no impact on existing CfDs, including Hinkley Point C, and Renewables Obligation and Feed-in Tariff (FIT) commitments.
It said the ‘significant cost reductions’ achieved in last September’s CfD auction indicate the existing support framework may secure more low carbon generation than originally anticipated.
New levies will only be considered if there is a “sustained and significant” real terms fall in the level of existing levies.
“Given the volatility of the forecasts and their sensitivity to changes in wholesale prices, the government would look closely at the drivers and sustainability of any decline before considering possible additional levies.”
However, it said new levies may be considered if they are likely to cut bills.
The update follows the announcement in the spring Budget earlier this year that the government was ending the LCF, which covers all existing low carbon electricity levies including CfDs, the Renewables Obligation and FITs.
According to the Budget, the government is confident the existing Total Carbon Price, currently set on the basis of the combined EU Emissions Trading System and the Carbon Price Support, is at the right level.
The government will continue to target a similar carbon price until unabated coal has been phased out.
The rebalancing of the climate change levy (CCL) main rates for gas and electricity in 2020-21 and 2021-22 will be carried out at next year’s Budget.
In a bid to ensure greater consistency between portable fuels for commercial premises not connected to the gas grid, the Budget has frozen the CCL main rate for Liquid Petroleum Gas at the 2019-20 level until April 2022.