The ‘zombie’ net zero levy adding billions to Britain’s energy bills

illuminem summarises for you the essential news of the day. Read the full piece on The Telegraph or enjoy below:

🗞️ Driving the news: A decades-old UK green energy subsidy, the Renewables Obligation (RO), is now adding over £100 annually to household electricity bills and will cost consumers an estimated £38 billion more over the next five years — despite being closed to new entrants in 2017
• Criticised as a “zombie” levy, the scheme continues to inflate energy bills due to its design linking subsidies to the outdated Retail Price Index (RPI), significantly outpacing inflation measured by the Consumer Price Index (CPI) 

🔭 The context: Introduced in 2002 under Tony Blair’s government, the RO aimed to accelerate renewable energy development by requiring electricity suppliers to buy green certificates (ROCs) from renewable generators
• Its generous terms — including RPI indexation and retroactive eligibility for older plants — have resulted in sustained, rising costs
• The scheme was replaced in 2017 by Contracts for Difference (CfD), but existing RO agreements remain active until 2037
• Drax alone has received £6.2 billion under the scheme

🌍 Why it matters for the planet: While the RO helped catalyse the UK’s early renewables boom — contributing to a record 46.4% share of renewables in electricity generation by 2023 — its outdated financial mechanism is now undermining affordability and public support for the energy transition
• High electricity costs can deter uptake of low-carbon technologies such as electric vehicles and heat pumps
• Calls are growing to replace regressive levies with more equitable funding via general taxation

⏭️ What's next: With energy bills under political scrutiny, reforming or phasing out legacy green levies like the RO is likely to feature in future UK energy policy debates
• Industry groups and consumer advocates are urging legislative action to limit the financial burden on households and improve industrial competitiveness
• Any overhaul would require primary legislation and coordination with broader net-zero objectives

💬 One quote: “It isn’t right that struggling households pay the cost of legacy subsidies like ROCs... They are, in essence, a regressive stealth tax on households,” – Sam Dumitriu, Head of Policy, Britain Remade.

📈 One stat: The Renewables Obligation added £6.7 billion to UK power bills in 2023–24, forecast to rise to £8.5 billion by 2026 — an increase of 25%.

See on illuminem's Data Hub™ the sustainability performance of Drax and peers SSE, and Eneco

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