Households face paying billions more in energy bills to fund green subsidy costs that were not outlined in Rachel Reeves’s Budget last week. [emphasis, links added]
The Office for Budget Responsibility (OBR) revealed in its latest economic assessment that £1bn (US$1.34B) a year will be added to household energy bills to fund Ed Miliband’s next auction for renewables projects, known as “allocation round 7” (AR7).
Costs of the scheme were not outlined in the Chancellor’s Budget. Instead, they were revealed in a footnote to the OBR’s Fiscal Outlook report released on the same day.
The revelation will cast doubt on Ms Reeves’s claims that Labour is bringing down the cost of living.
It also comes amid a clash between the OBR and the Chancellor about whether she told the truth about the state of the public finances in the run-up to the Budget.
The OBR’s disclosures relate to contracts for difference (CfD), the system under which levies are added to household bills to finance subsidies for green energy projects, including wind, solar, and nuclear.
The OBR forecasts that CfD costs are set to rise from £2.3bn (US$3.1B) in 2024-25 to £4.6bn (US$6.2B) by 2030-31.
However, it warned that the Treasury’s estimates excluded an additional £5bn (US$6.7B) for AR7 and subsequent subsidy rounds.
It said:
“These [figures] exclude future auction rounds, including AR7 for which outcomes are expected in early 2026.
“This is expected to auction CfD contracts up to £1bn a year (in 2025 prices) between 2028-29 and 2032-33.”
Mr Miliband’s Department of Energy Security and Net Zero (DESNZ) confirmed that AR7 would add to the cost of CfDs.
However, it said the money was needed to boost renewables and reduce the UK’s reliance on gas.
Desnz added that the cost of AR7 subsidies had been excluded from the Budget because the Treasury only accounted for policies already announced.
Details of the AR7 scheme are set to be confirmed in January.
“The cost of keeping Britain locked in dependency on fossil fuels could be tens of billions of pounds,” a spokesman said.
As well as funding the CfD scheme, households are also braced for a further hit from another subsidy called the capacity market levy.
This is a separate subsidy that pays generators to turn on gas-fired power stations and hydroelectric dams when output from intermittent renewables plummets.
Treasury figures suggest the costs of the capacity market levy will rise from £1.6bn (US$2B) in 2025-26 to around £4.6bn (US$6.2B) in 2030-31.
Read rest at The Telegraph
