- Chancellor aims to slash bills by cutting levies
- Energy Company Obligation scheme to be scrapped as well
- Announcement has been well received by industry bodies
Certain green levies on electricity bills will be scrapped in a move that could save households £150 a year, chancellor Rachel Reeves announced in today’s Budget (26 November).
The government will cover three-quarters of the Renewables Obligation (RO) levy for the next three years, which should cut bills by £102 on its own. Combined with other measures, including scrapping the ECO4 scheme, energy bills are predicted to fall by £150 a year.
It could also potentially help people looking to install heat pumps as electricity should become cheaper as green levies (officially known as policy costs) are moved into general taxation.
Cutting levies on electricity is something the clean energy sector has long called for, with the idea being that if the difference between electricity and gas is smaller, it will make a heat pump a more economically-sound option over a gas boiler.
What is the government’s Warm Homes Plan? Read our dedicated guide for more information.
Speaking in the House of Commons today, Reeves said the government was “keeping its promise to get energy bills down”.
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Poorer households, the government said, should be able to save even more when combined with savings from the Warm Homes Discount.
“Reform of the Renewables Obligation is both a welcome and expected move by the Chancellor,” said Chris Hewett, chief executive, Solar Energy UK.
“Together with the rising proportion of power coming from cheap solar and other renewable sources, plus reform to the electricity markets, we can expect bills to fall further in the coming years”, Hewett said.
Reacting to the Budget, Dame Clare Moriarty, chief executive, Citizens Advice, praised the announcement, saying that lowering energy bills will “help households across the country keep the lights on”.
“Our advisers see every day the devastating impact that unnecessarily punitive policies and spiraling bills have had on households, like parents pushed into impossible choices between the food shop and topping up the meter,” she said.
“These commitments mark a vital turning point. We hope the Government continues in this direction, as there’s still more to do to ensure every household can live a life free from poverty.”
Josie Murdoch, analyst, Ember, also welcomed the news, and said that cheaper electricity will lower energy bills for every UK household and also but also increase the competitiveness of heat pumps and electric vehicles (EVs), as well as cut the national dependency on fossil fuels.
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