Even though the government doesn’t collate data about its spending on supporting renewable energy and un-oily materials, it has recently revealed the cost of the three biggest subsidies for renewable energy. They are:
The Renewables Obligation (RO) – the government puts an obligation on all electricity suppliers to provide a certain amount of electricity generated by renewables. At the same time, the government gives all accredited generators Renewables Obligation Certificates (ROCs), to show they have produced electricity from renewable sources. To show they have supplied enough renewable energy, the suppliers buy the ROCs from the generators and then show them to Ofgem. If the amount of renewable electricity supplied is less than the target, the suppliers have to buy additional ROCs. The money paid for the ROCs supports the generators of renewable energy and comes from our energy bills. This measure cost the energy companies £3.5 billion in 2014-2015 and will rise to £9.1 billion in 2020-2021. The RO is being replaced by Contracts for Difference and will close to new generators from March 2017. Solar was removed from the RO in December 2015.
Feed-in-Tariffs are also paid out of our energy bills. They have two components. Each small-scale generator can claim a payment for all they energy they produce – even if they use it themselves. The second part of the scheme pays the generator for the electricity they export to the grid. FiTs cost us £740 million in 2014-2015; the cost will rise to £1.6 billion by 2020-2021.
Contracts for Difference (CFD) – this is the one you may have heard about with relation to the Hinkley Point nuclear power station. If you want a CFD, you have to demonstrate you will meet fixed criteria and may have to compete for funds. 210 If you are successful, the government will pay any difference between the cost of generating the electricity and the market price. This scheme directly supports low-carbon generators. In 2014-2015 it cost £5 million and the cost will increase to £2.7 billion in 2020-2021. General taxation pays for the CFD.
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