Question

To ask the Secretary of State for Energy and Climate Change, what estimate he has made of how much renewables subsidies (a) added to industrial electricity bills in 2012-13 and (b) affected the wholesale price of energy.

In March 2013 DECC published an assessment of the impact of climate change and energy polices on electricity and gas prices and consumer bills[1]. The report estimated that, in 2013, support costs for renewables added around 10% to electricity bills for energy intensive user (8% in relation to the renewables obligation (RO) and 2% in relation to the small-scale feed-in tariffs (FIT)).

Increased deployment of low-carbon generation, including renewables, which typically have low generating (and therefore operating) costs, helps to put downward pressure on wholesale electricity prices. It is not possible to split out the impact of renewable support policies on these wholesale price effects from other drivers such as, for example, the EU emissions trading scheme (ETS). However, the March 2013 report estimated that the overall wholesale price impact of all low-carbon policies was a reduction in the wholesale price faced by industry of around 30p/MWh in 2013.

The Government recognises the particular competitiveness issues faced by some industries in terms of their energy costs and has acted to mitigate the impact of energy policies on those industries. This includes the announcement, as part of the 2014 budget that the Government intends to compensate those energy-intensive industries most at risk of higher electricity prices resulting from the RO and the FIT schemes. We expect that compensation will begin in 2016-17, subject to EU state aid clearance.

[1]https://www.gov.uk/government/publications/estimated-impacts-of-energy-and-climate-change-policies-on-energy-prices-and-bills)