Energy prices are made up of a combination of things, such as wholesale market prices, green taxes, levies, regulations, transmission charges, etc. In particular, UK electricity contracts and tariffs are subjected to a lot of extra non-commodity costs. So much so that the build-up of a business electricity bill is ~45% commodity cost, and ~55% non-commodity cost. One of the largest non-commodity costs on power bills is the RO (Renewable Obligation) tax. This has been in place since 2002, and has moved the UK power network to include a mix of renewable, green energy sources. It has been announced that the RO scheme will now be closed, despite its general success.
Since the Renewable Obligation scheme was introduced in 2002, the UK has drastically altered the standard power fuel mix, and has reduced its carbon emissions. So much so that Ofgem confirmed that 23.5% of the UK’s electricity is now sourced from low-carbon generation, as opposed to 1.3% before the scheme took effect. This has been a long process, but in 15 years, the changes have been impressive.
The scheme has officially closed from 31st March, however Luke Hargreaves, head of Renewable Generation at Ofgem confirmed that:
So we’ve not seen the end to the Renewable Obligation, and it will always remain within the UK generation mix. New renewable projects for UK power generation will be able to go through the Contracts for Difference Scheme, which is aimed at: increasing the amount of renewable power projects/generators in the UK, to provide a variety of sources of power, and to increase strength of the UK’s own supply.
Energy Minister Jesse Norman stated:
Now the CfD scheme will carry on this trend.
With another general election upcoming in the UK, there is the possibility that energy taxes, levies, and legislation could change, depending on how the election turns out, and how the BEIS develops strategies for the energy industry in the future. Until the general election, there will be no additions or amendments to the current legislation.
**Sources: Ofgem, Energy Live News