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Potential Non-Commodity Charges are on the Horizon
True Powered by Open Energy Market
:
Feb 6, 2024 2:53:55 PM
You, and your business, pay for energy each month but the money you spend isn’t for the sole cost of energy itself. A percentage of the money you pay is used to develop and maintain the infrastructure that allows for energy generation and distribution.
From the pipes and cables to the turbines and nuclear reactors, your money helps to contribute to the delivery of energy to millions of people in the UK.
This year, as early as April, a new set of charges may be added to energy bills.
To fund investments in new low-carbon generation and net-zero technologies, additional policy-related charges will likely occur on end-consumer invoices, adding as much as £3 /MWh to energy costs over the next 5 years.
These are to specifically support the building of new nuclear generation and the development of green hydrogen and carbon capture technologies as well as to create funding for additional exemptions on Energy Intensive Industries.
There are currently four potential charges in the scope but it is important to emphasise there is no legislation or dates currently confirmed.
Andrew Paterson, Head of Commercial Operations, said:
“Unfortunately, energy bills are likely to become more expensive from April. We work hard to provide businesses with lower energy costs through intelligent energy procurement strategies and we’re confident that we can help with some of these charges, but as they are so wide-ranging, organisations across the UK should be aware that they will have higher bills from April 2024.”
Nuclear Regulated Asset Base
What for?
To finance the severe cost of installing new nuclear capacity, the government is introducing a ‘Regulated Asset Base’ (RAB) model, whereby consumers pay upfront via a charge on invoices for future projects.
How much will it cost?
The initial estimate is under £0.50/MWh to invoices, with higher costs to follow depending on inflation, the cost of technology-approved projects and available funding.
When will it be introduced?
There is a potential for this to come in April 2024 depending on available government funding for the first nuclear project. It is likely to be delayed to April 2025.
Hydrogen levy scheme
What for?
This is to fund the government incentive scheme that was created to encourage green hydrogen production by offering guaranteed returns to investors if hydrogen prices fall below a minimum level.
How much will it cost?
The government has committed £100 million each year until April 2025. Then funding is expected to pass to all energy consumers via a policy charge added to bills.
The estimated cost could be £0.50 to £0.60/MWh.
When will it be introduced?
Possibly from April 2025. However, it may not go ahead as early as that due to concerns of overburdening energy consumers with extra expenses.
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Levy to support Energy Intensive Industries (EIIs)
What for?
To fund the additional relief granted to the UK’s largest industrial energy consumers that need to remain competitive with Europe counterparts.
How much will it cost?
EIIs will save around £14/MWh.
As this discount will have to be met by suppliers, it is likely to be passed onto other consumers via a new EII supporting a charge of around £1/MWh added to electricity invoices.
When will it be introduced?
The subsidy is to be introduced from Apr 2024 but the levy will be paid retrospectively from April 2025 onwards, so the charge will possibly appear from then.
Carbon capture subsidy
What for?
A new subsidy to support Carbon Capture, Usage and Storage
(CCUS) projects to reduce emissions in industries where other carbon-saving measures cannot be applied.
(CCUS) projects to reduce emissions in industries where other carbon-saving measures cannot be applied.
How much will it cost?
The cost is currently unknown as it depends on the nature of the scheme and the level of support offered.
The initial estimate is £0.5 - £1/MWh on electricity invoices.
When will it be introduced?
This CCUS project is still subject to a government consultation, the charge will possibly appear from April 27-28.
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