By Paul Homewood
https://www.ofgem.gov.uk/news/changes-energy-price-cap-between-1-october-31-december-2024
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OFGEM have just published the latest Energy Price Cap, with the increase inevitably blamed by Ed Miliband on “gas markets controlled by dictators”. A strange thing to say when we buy most of our gas from Norway and the US!!
According to OFGEM, policy costs amount to £187pa, but this does not tell the full story:
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Policy costs include ROC subsidies, but not CfDs, Capacity Market costs, grid balancing costs, grid upgrades, FITs or carbon taxes, all of which appear either in wholesale costs or network costs.
We know from OBR figures that CfD subsidies this year are projected at £2.1bn, on top capacity payments of another £1.4bn. FIT’s cost an estimated £1.7bn last year too, so these three tot up to £5.2bn. Then there are system balancing costs which are running at about £2bn a year.
These all equate to about £25/MWh.
There is one other factor to take into account – Carbon Costs. In essence gas power stations have to pay a tax for every unit of gas consumed, equivalent to £3.31/MWh. Assuming energy efficiency at a CCGT plant of 60%, this adds £5.52/MWh to generation costs.
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.https://www.gov.uk/guidance/climate-change-levy-rates
In total then we are looking at about £30/MWh of extra costs imposed by climate policies, on top of the ROCs already mentioned at £187pa. This increases the typical household bill by over £300 a year.
Households of course only use about a third of UK electricity, meaning that a further £600 is incurred by non-domestic users, such as public sector, industry and commerce, all ultimately paid for by the public.