Proposed green levy cuts: a household relief or renewable energy crisis?

---

September 2022 update

The below article was written in August 2022, during the high-profile national campaigns launched by MPs Rishi Sunak and Liz Truss as they competed to become Prime Minister.

Since this article was originally produced, Liz Truss has been declared Prime Minister of the UK, pledging to scrap green levies AND lift the ban on fracking within days of her formal appointment.

Although the way forward on green levies remains unclear, Liz Truss’ decision to cut household energy bills by ‘scrapping’ green levies remains unwavering and is, therefore, still a cause for concern within the industry.

---

MPs Rishi Sunak and Liz Truss have been heavily featured in the press over the last few weeks as they share their thoughts, comments, opinions and proposed policy changes, across a wide spectrum of subjects, in their hopes to be elected as the next Conservative Party leader.

As the two compete to be declared the next Prime Minister of the UK, taking over from the current PM Boris Johnson who is stepping down in September, one of the many subjects the two have openly discussed is, of course, how they plan to reduce rising living costs and - specifically - energy bills.

This is of particular significance as October’s Autumn budget is expected to see another rise in the energy price cap, increasing household energy bills to an estimated £3500 per year.

And, with energy bills expected to rise to such dizzying levels, we’re all keen to find ways to reduce our bills.

However, what Truss in particular is proposing is extremely unlikely to be truly effective for either domestic households, businesses or the energy sector and, in fact, could indeed negatively impact renewable energy projects and the UK’s commitment to Net Zero

Proposed cuts to green levies  

What Truss proposes may sound like a welcome relief to household energy bills but, actually, could cause more harm than good, especially in the long term efforts of the UK to achieve Net Zero.

Why?

Truss has proposed cutting green levies.

However, cutting green levies from our energy bills comes with the following issues:

• Green levies make up approximately £155 of our annual household energy bills. With bills expected to rise to near £4000 per annum, a saving of £155 is almost inconsequential and the issues run much deeper.

• This cut is proposed to take effect for just 1 year - a short term ‘solution’ to a long term problem that, once the year is over, will see levies and taxes harder to reintroduce.

• The removal of green levies will have an inevitably negative impact on efforts to invest in and implement renewable energy and alternative energy projects.

Green levies and renewable energy

Green levies are taxes imposed on sources of pollution (or carbon emissions) and serve to discourage inefficient energy sources, and encourage the implementation of eco-friendly alternatives; enabling investment in renewable technologies and ensuring the energy efficiency of homes & businesses.

And, removing approximately £155 per household per annum of funding from renewable and alternative energy projects and incentives, when there are an estimated 28.3 million households in the UK in 2022, would see over £3,600,000,000 (£3.6 billion) cut from the sector.

What’s more, the green levy also supports the funding of the Green Gas Certification scheme which supports the development of Anaerobic Digestion (AD) plants and technologies, which are fundamental to providing a carbon neutral source of renewable energy.

As such, severing this source of funding for energy projects and initiatives for a year would set the renewable energy sector back significantly; delaying the UK Government’s commitment to reaching the net zero target by 2050 whilst having very little impact on the cost of living and/or rising energy bills for the average UK household.

In short, the proposed green levy cuts may, on the surface, seem like an easy and logical way to relieve some of the pressure on UK households during this challenging and unpredictable time but, in reality, shaving £3.20 per week (£155 per annum) off of energy bills over the course of a single year is unlikely to create the long term financial change we need and, in fact, will have a far greater (and potentially more devastating) impact on the UK’s efforts to reduce carbon emissions and fight climate change - leading to much greater complications in the future.