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As part of the government’s continued moves to abide by EU emission regulations a new levy is to be placed upon business electricity customers.
The duty, known as Contracts for Difference (CfDs) is intended to supplant the Renewables Obligation (RO). For now though it will be an additional cost on electricity bills. Indeed Renewables Obligation will continue to be levied until 2037 as the 20 year lifespan of that scheme phases out, whilst CFD’s from 2017 are designed to replace the Renewables Obligation for any new plant.
The overall intention is by 2050 to have reduced CO2 emissions by 80% on 1990 levels and to encourage the sourcing of 15% of energy to be from renewable sources by 2020.
The point of CfDs is to give clear, unsurprising and long haul costs for power created from renewables so as to support greater interest in new, clean generation.
CfD's do precisely what they state; they are an agreement that ensures an installment for any 'distinction' experienced.
This ‘difference’ is measured against a ‘Floor’ Price below which the market price of electricity cannot fall without a compensatory payment being made. In other words if the price of electricity is too low to support more costly generation through renewable sources a payment will be made to the CfD recipients, this case the qualified inexhaustible generators, to remunerate them for the low(er) electricity cost.
These CfD costs will be charged to all Suppliers under the Levy Control Framework and are wanted to apply from April 2015. Therefore these costs will be recouped from clients legitimately through their power receipt.
The projected costs are estimated at being any level between £0.79/MWh – £1.90/MWh. However some suppliers are forecasting just a 0.1p/kWh charge in the initial period, whilst other suppliers are awaiting until early 2015 before they make any assumption on the likely cost.
Not all suppliers have established how they will charge this cost to customers however as they do we will provide the relevant information below and ensure that when comparing vitality contracts you can do as such on a like for like premise.
For help in understanding CfDs or to find out your options come contract end simply give, please call us on 0800-0488-472, we’d love to hear from you to discuss how your business can benefit.