The government has decided to end the availability of the green import exemptions for the Contract for Difference (CfD) and Feed-in Tariff (FIT) schemes.
This follows a government consultation on the review of the FIT and CfD schemes’ cost exemptions for green imported electricity and timings on the removal of UK recognition of EU Guarantees of Origin (GoOs).
Payments to electricity generators supported by the CfD scheme are funded through a compulsory levy on electricity suppliers in Britain, known as the ‘Supplier Obligation’.
The costs of the FIT scheme are also levied on suppliers. Energy companies contribute to the costs of these schemes in proportion to their share of the electricity sales market.
Until now, electricity suppliers could seek exemption from these costs, named ‘green import exemptions’ (GIEs).
Eligible imported electricity is not included in a supplier’s market share of supply for the purpose of calculating their obligations to pay CfD and FIT scheme costs.
This means that suppliers supplying electricity across the UK which has been generated via renewable sources in an EU member state can reduce their liability to pay towards the costs of these domestic support schemes, with those costs being absorbed by other suppliers.
A Sunday Times investigation found that British Gas bought 20.1 million certificates at low prices from hundreds of European sources in 2019-20, which helped the company to avoid almost £49 million in green levies.
Nigel Pocklington, Chief Executive Officer of Good Energy, said: “This loophole not only allowed suppliers to claim brown energy as ‘green’, it let them off the hook for the UK’s basic renewable support systems which all customers pay into. For customers on these European GoO-backed green tariffs, a basic brown tariff would be greener.
“The future of green levies looks uncertain in the current crisis. Shifting some of the costs off bills and into general taxation would be fairer. But in the meantime, it is good to see the government close the door on this scandalous practice.
“We hope to see progress on the transparency of all green tariffs, including those backed by UK renewable certificates. Customers knowing where their energy is coming from is more important than ever, as is genuine support for local, home-grown renewables.”
Last year, the government announced its intention to tighten rules around the ‘green tariffs’.
Many have voiced concerns that often tariffs described as green are misleading consumers into signing up to them based on their green credentials.
A consumer survey conducted by the Social Market Foundation last year found that 39% of respondents do not know enough to decide what is meant by a green energy tariff and 47% want to know more about the sources of ‘green energy’.
ELN has contacted BEIS and Centrica for a response – they did not reply before publication.