Households to cough extra £1.5bn after tweak in green subsidy backfires

UK energy users will be forced to pay an extra £1.5bn for their green energy over the next fifteen years due to a tweak of the government’s policy on green energy subsidies, the National Audit Office has warned.

The CfD programme, which started in 2012 and has seen 47 projects awarded so far, motivate green energy companies to up their game and at the same time provide relatively cheap ‘clean’ energy to consumers.

The change in the policy of the auction meant that larger, cheaper projects for low-carbon power could not apply for the loans because they exceeded the energy capacity. This tweak in the regulation was implemented in 2017 auction upping the costs of the chosen projects by £100m each year for 15 years, the NAO said.

The subsidies were awarded to 11 projects capable of powering 3.6m homes, although the costs of that would have been cheaper without the cap on larger projects. This caused the Department of Business Energy and Industrial Strategy to face backlash for not testing the impact of the policy change.

The NAO report said: “The Department changed the auction design in relation to the capacity cap as part of a wider change that enabled bidders to submit flexible bids. At the time, it recognised that the change could enable auction results that would go against its principle that more expensive projects should not be accepted if a larger project with a cheaper unit price is rejected.

“The Department has not provided us with any evidence to show that it considered how likely this was to happen. It also did not notify its programme management board, which was in place to consider changes to the auction design."