The LCF was designed to control the costs of supporting low carbon electricity, paid for through consumers’ energy bills. It sets an annual budget for projected costs of all BEIS’ low carbon electricity levy-funded schemes until 2020/21, rising to £7.6 billion in 2020/21 (2011/12 prices). The Framework includes the costs of the ‘Contracts for Difference’ (CFD), the ‘Renewables Obligation’ (RO), and the ‘Feed in Tariff Scheme’ (FiTs), as well as early CfDs awarded under the ‘Final Investment decisions Enabling for Renewables’ (FiDeR) process.
In July 2015 the Office of Budgetary Responsibility (OBR) published forecasts under the Levy Control Framework to 2020/21 of £9.1 billion (2011/12 prices), showing that spend on renewable energy subsidy schemes was set to be higher than expected. This was due to accelerated developments in technological efficiency, higher than expected uptake of demand-led schemes and changes in wholesale prices. Subsequent OBR forecasts have projected spend at £9 billion (November 2015) and £8.7 billion (March 2016). The latest figures – as published by the OBR at the 2016 Autumn Statement - is that the projected future spend will be £8.4 billion in 2020/21 (November 2016). The Government has taken action to control costs under the LCF including closing the RO early to onshore wind and small scale solar and introducing caps for future spend on FiTs. The Government will continue to ensure the impact of levy support on bills is kept as low as possible and support is given to projects that need it most.
BEIS Consumer Funded Policies Report
BEIS has published a report on its Consumer Funded Policies (November 2016). This sets out the actual expenditure and outcomes of BEIS consumer funded policies for recent financial years, as known at October 2016, and their projected expenditure over the planning horizon for each individual policy.
The Report provides an update to the Command Paper published in November 2014 as part of the former DECC’s Annual Energy Statement 2014 and covers the Renewables Obligation (RO), Feed-in Tariffs (FITs), Contracts for Difference (CfDs) (including Investment Contracts awarded under the FID Enabling for Renewables process), Warm Home Discount (WHD), the Capacity Market (CM), and the Energy Company Obligation (ECO).
LCF Lessons Learned Report and Government Response
In June 2015 Tom Kelly, one of the former DECC’s Non-Executive Directors, carried out a lessons learned review of the management of the LCF, following the identification of the projected LCF overspend in April 2015. This report sets out his recommendations and is accompanied by a Government response on progress against those recommendations.