Little in energy terms exercises the political right quite so much as demands for the abolition of the green levies. But this demand, would, if taken literally, put the British Government in court, both domestically and internationally. It is likely to lose if this happened.
Currently green levies constitute around 8 per cent of energy bills as independently assessed. A lot of this income stream comes from VAT charges on energy and the UK’s version of a carbon tax, although some are also payments to people on low incomes under the Warm Homes discount. This is as well as what passes for the UK’s energy efficiency programme. Presumably political pressure would mean that if the green levies were abolished the Government would have to find some cash for the low income families out of public spending.
However a lot of the money in the green levies goes on funding renewable energy. This stream is decreasing as increasingly cheap new renewable energy schemes actually give consumers their money back. (See here for discussion). There are still quite a few schemes which are heavily supported, including around 5 GW of offshore windfarms. The capital repayment schedules of these schemes would fall heavily into debt if their support through the Renewables Obligation were to be cut off – especially as energy prices declined over the next couple of years. The owners of the schemes would be enraged. The Renewables Obligation was the incentive scheme for renewable energy that preceded the CfD system. See here for a discussion.
But none of the owners of any of the renewable energy projects (which now make up around 40 % of UK electricity output) would be terribly pleased either. The majority of schemes are safe at the moment, indeed, some making a lot of money, with today’s bloated wholesale power prices. However, nobody is going to bank on this lasting forever.
The owners will be incensed if the renewable energy support payments to renewable energy scheme operators were simply stopped. Some of the projects have their Government-backed income stream protected by good contracts – contracts for difference (CfDs). The Government would lose an open and shut case if they tried to scrap them. There is no direct legal protection for the over 20 per cent of electricity supply funded under the Renewables Obligation since the incentives can simply be removed by rescinding previous legislation.
But, hang on, if the UK Government did that the UK Government would most likely end up in an international court under the terms of the Energy Charter Treaty. I imagine there would be something that looked a bit like a class action launched under this funded by the aggrieved owners of the (particularly offshore wind) schemes. These owners include companies with a few bob to spare to pay lawyers like Vattenfall, Statkraft, Equinor, Scottish Power, E.ON, and Orsted. They would argue, with I think some merit, that the UK Government had seriously altered commercial regulations under which the renewable investments were originally made.
But of course the Government will be already knee-deep in international litigation with the EU after their preferred scrapping of the Northern Ireland Protocol. Hence an energy dispute would only (?) build on the UK’s new, but rapidly expanding, reputation for international law-breaking.
By David Toke
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