The Renewables Stealth Tax

The Non-Fossil Fuel Obligation (NFFO) was introduced by the Conservatives to subsidise nuclear power.  It was replaced by the Renewables Obligation (RO), which excludes nuclear power but buries windmills and other renewables in money.  The Renewables Obligation, in particular, is rather complicated (I've got in trouble before trying to calculate its value) so the Government couldn't effect a neat transition from the NFFO to the RO.  As part of the transition the Government have wound up making a bit of a profit out of some old NFFO contracts.

The Guardian smell a scandal and reported the story today, with condemnation of the windfall from the Conservatives:

"Last night Charles Hendry, the Conservative shadow energy minister, accused the government of using the scheme as a "stealth tax" and warned it would further damage public confidence in environmental measures."

I think this rather misses the point.  The fact that the Government are putting some of the revenue into the general pot doesn't really affect whether it is a stealth tax at all.

The Renewables Obligation imposes a levy on electricity companies who have to buy Renewable Obligation Certificates (ROCs) for a certain percentage of the power they generate.  It is a tax and a pretty hefty one.  It it worth just short of a billion at the moment, more than the Climate Change Levy.  It's just that the revenue is hypothecated and placed straight in the pockets of renewable energy companies.

The sums involved are staggering.  For comparison, in the United States the Energy Information Administration have revealed the subsidies provided to different types of power:  About 25 pence per MWh for coal and about 14 pence per MWh for gas.  Renewables are treated far more generously and receive around £13 per MWh.

At the last online, business to business, auction by e-ROC the average ROC price was £53.27.  A renewable energy company will get one ROC for every MWh they produce.  That £53 is a truly massive subsidy and isn't the only financial advantage renewables are given.  They also get exemptions under the Emissions Trading Scheme and the Climate Change Levy.

All this costs ordinary people a fortune.  Climate change policies constitute 14% of the average domestic electricity bill and 21% of the average business electricity bill.  How many people know that they're paying that much?  That the Government could cut electricity bills significantly overnight if they scrapped these policies?

Is the shocking stealth tax the relatively small amount that the Government are creaming off, where there is at least a small chance it will be spent on something worthwhile, or the huge amounts being pocketed by renewable companies?