Six things you need to know about energy subsidies

Talking about energy subsidies isn’t everyone’s idea of a party, sure. But there are some things you just have to make a bit of space for from time to time. So let us try and break it down for you.

1. There are lots of different forms of subsidy. 

There are straight-up cash payments or tax breaks and more. There are also lots of different things that get subsidised, from oil exploration to solar panel installations. We’re going to simplify things here by looking at cash payments for different forms of electricity generation (so that wouldn’t include drilling in the north sea). It’s not that the other stuff doesn’t matter - we just don’t have space for it here.

2. Any new electricity generation needs subsidy.

Here lies the rub. You’ll often hear complaints about renewables needing public money to get built. What you don’t hear is that they’re not alone. The prices that power producers can sell their electricity for these days just aren’t high enough to bring forward new investment - even for traditional, dirty fossil fuel power stations. And they won’t be anytime soon.

3. Renewable subsidies are being cut.

Since the 2015 general election returned a majority Conservative government there have been a series of cuts to different renewable subsidies. For example, in late 2015 the feed-in tariff for solar panels was cut by two thirds. Then they ended support for onshore wind. In theory, subsidies should be cut over time as technologies come down in the price. In practice they’re being removed for political reasons.

4. Subsidies to fossil fuel power stations are on the rise.

Ok, so here we go - hold tight! The way the UK generates electricity is changing. In order to fight climate change we’re starting out on the road to a renewable power system. Until we’ve made the full switch to clean electricity we still need some of the old stuff.

But because of the way prices are changing there’s a risk some of it could close too soon, for purely economic reasons. The government wants to ensure there’s enough capacity at the right times during the year to ‘keep the lights on’. This means subsidising gas, coal and diesel power stations. In 2014 at least £675m of contracts, starting in 2018, were awarded to gas and coal plants just to stay open. In 2015 £176m of contracts, starting in 2019, were handed to new diesel plants alone - one of the dirtiest fuels. And over just four months this winter we will pay £77m to just two coal fired power stations simply to exist.

5. This isn’t fair. And it’s not clever either.

It would be stupid to argue against all financial support to fossil fuel power stations: we’d risk not having enough capacity at crucial times of year. But currently we’re overpaying fossil fuel generators while pulling support from renewables, slowing down the transition to clean energy. That isn’t fair. Plus - the more we overpay fossil fuel generators now, the longer it will take us to kick our fossil fuel habit - and so the more we’ll overpay them in the future too. That isn’t clever. Two words: climate change.

6. It’s time to switch things up.

Photo: UCAR  Creative Commons

Photo: UCAR Creative Commons

The government has some big decisions to make. Will it carry on throwing money at fossil fuel generation, at the expense of renewables like onshore wind? Or will it create a long term strategy, including new storage and demand reduction technologies, to reduce to a minimum the amount we need to spend on dirty power stations? We think it’s time to switch things up and ensure we’re investing in a renewable future - not one locked into climate-busting fossil fuels.

As government continues to subsidise fossil fuel power, it’s removed support from the cheapest source of low carbon power we have: onshore wind. Blown Away is 10:10’s campaign to put this right. Show your support for onshore wind by joining the campaign.

Cover photo: Tim Snell Creative Commons 3.0