Household energy bills are set to fall after ministers unveiled plans to slash green subsidies, it emerged yesterday.
Billions of pounds are handed out by the Government to wind farm and solar energy firms every year, with families and manufacturers picking up the cost.
These climate change subsidies add around £110 a year to a household’s average bill.
Theresa May’s industrial strategy, published yesterday, suggested that these levies should be dramatically reduced to help steel plants, which pay for emissions, compete overseas.
This help for industry would have the knock-on effect of bringing down household bills, Government sources said.
The move will be seen as another example of the Prime Minister rowing back on David Cameron’s green legacy. Even he got tired of the environmental agenda after a while, telling his ministers in private to ‘get rid of the green crap’.
The document detailing the new industrial strategy said that while subsidies had originally been needed to ensure green energy firms could make a profit, that is now no longer the case.
‘The transition to low-carbon – and the securing of our energy supplies – must be done in a way which minimises the cost to business and domestic consumers,’ it said.
‘Subsidies and other forms of state support have played an important role in creating markets for new technologies and driving down their costs.
‘But it is important that we move steadily to an operating model in which competitive markets deliver the energy on which our country depends.’
At present, energy-intensive industries pay around £20 for every ton of carbon dioxide they emit. This money goes towards subsidies to green energy firms.
But steel firms are among manufacturers saying the huge costs make them uncompetitive on world markets.
The new strategy would cut these firms’ energy costs by cutting Government subsidies for offshore wind farms. This would also bring down household costs – as families also contribute towards the subsidies on their bills.
An official review will be held later this year, after which the subsidies could be slashed.
The green paper on the new industrial strategy, published yesterday, said the Government was seeking to ‘reduce the cost of achieving our decarbonisation goals in the power and industrial sectors’.
It added: ‘The review will cover how best to support greater energy efficiency, the scope to use existing instruments to support further reductions in the cost of offshore wind once current commitments have been delivered, and how Government can best work with the regulator Ofgem to ensure markets and networks operate as efficiently as possible in a low-carbon system.’
The new deal could see the prices the Government pays for electricity generation from offshore windfarms slashed once contracts come to an end.
For example the world’s biggest offshore wind farm, off the coast of Yorkshire, secured a contract three years ago under which it is paid four times the market price for every unit of electricity it generates.
This costs an estimated £280million per year in subsidies. The Government could decide to cut this subsidy after the contract ends in 2029. The steel industry, in particular, has blamed green levies for making it harder to compete with foreign firms, especially Chinese ones.
A spokesman for UK Steel said: ‘The steel industry welcomes the Government’s commitment to minimise business energy costs, cut back on renewable subsidies, and help industry become even more energy efficient and we look forward to helping Government turn this commitment into action to allow us to compete on a level playing field.’
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