Gillian Simmonds is Head of Stakeholder Relations at RWE npower, responsible for engaging with senior government officials about how energy policy impacts customers and the wider industry. Here she reviews last week’s Autumn Statement and what it means for business energy consumers.
The good, the bad and the uncertain
Since coming to power in May, the Conservative Government has been keen to demonstrate they are delivering on their manifesto commitment to shift from the pro-renewables stance of the Coalition to one that’s more pro-business.
Indeed, in his Autumn Statement last week, George Osborne said: “Going green should not cost the earth.” But still, many energy consumers could be paying more for their bills as a result of some of the new measures he announced.
That said, there’s good news for some energy intensive users (EIIs). While exemptions from Contracts for Difference (CfD) costs will not start until April next year, the Chancellor did confirm that relief from Renewables Obligation (RO) and Feed in Tariff (FiT) costs for eligible EIIs will be permanent.
RO and FiT relief to be funded by non-eligible consumers
As announced in October by the Prime Minister, EIIs will be eligible for compensation from RO and FiT costs as soon as the government receives EU State Aid approval (anticipated before the end of this month).
However, these RO and FiT compensation payments – which are to be funded by the Treasury (i.e. tax payers) – will be replaced by a permanent exemption scheme from 2017. This means the savings to EIIs will then be recovered from all other consumers, including non-exempt businesses.
But this exemption scheme will be subject to consultation and, again, to State Aid approval. So the size of the scheme and the scale of the impact on other consumers is still to be determined.
Showing faith in nuclear
Security of supply is clearly a big area of concern for consumers. And to help deliver this, the government appears to be showing faith in nuclear generation, with Osborne announcing a major commitment to spending £250m on new nuclear research over the next five years.
In particular, there is funding for a competition to identify the best value small modular reactor design for development in the 2020s.
Another interesting development is the withdrawal of support for Carbon Capture and Storage. This had previously been promoted as a key part of the solution to reducing carbon emissions, both for the fossil generation sector and, in the longer term, for the industrial sector. It appears that part of this funding has been shifted to the new nuclear reactor competition.
News on CfD auction and energy tax simplifications
We’d hoped the Comprehensive Spending Review that accompanied the Autumn Statement would include more detail on the next Contracts for Difference auction, where renewable generators compete for subsidies. But it looks like we’ll have to wait until the Spring for news.
What we do know, from Energy Secretary Amber Rudd’s recent Reset speech, is that there will be an auction in 2016, with two further auctions to follow before 2020.
There is a clear focus on offshore wind, together with a challenge to the industry there to reduce its costs. However, it remains unclear whether mature technologies, such as onshore wind and solar, will be eligible to participate in these auctions. So we’ll have to wait and see.
Any update on the current review of energy efficiency regulations for business was also absent, which was disappointing if not entirely unexpected. So it’s likely we’ll have to wait until Spring for more on the planned simplifications my colleague Kate Garth recently talked about at Energy Live (see here for her blog on this).
Boost for energy efficiency
So this covers the main energy-related business news from the Autumn Statement and Comprehensive Spending Review. We’ll continue our analysis and lobby for greater detail over the coming weeks. But in the meantime, if this raises any questions, do get in touch via [email protected].
This is a sponsored article.