Understanding Your Energy Bill: Environmental Charges
Environmental Charges
In 2019, the UK government set a target to achieve net zero carbon emissions by 2050. In order to meet this target, numerous environmental and green energy schemes were introduced to encourage households and businesses to switch to renewable energy sources and reduce their carbon footprint. These schemes are funded through charges that are included in electricity bills. Here is what each charge means:
Feed-in Tariff (FIT)
The Feed-in Tariff (FIT) scheme is designed to encourage households and businesses to generate their own renewable electricity, such as solar or wind power, by offering them a payment for every unit of electricity they generated.
The FIT payments are made up of two parts: a generation tariff and an export tariff. The generation tariff paid the owner of the renewable energy system for every unit of electricity they generated, regardless of whether they used it themselves or exported it to the grid. The export tariff paid the owner of the system for every unit of electricity they exported to the grid.
Those who don’t generate energy pay for the scheme through the FIT charge. This surcharge is currently between 0.30-0.35p per kWh of electricity consumed. This may vary slightly between suppliers, but all suppliers are obligated to include this charge.
Renewables Obligation (RO)
The
Renewables Obligation (RO) scheme was introduced in April 2002 and was designed to encourage energy suppliers to source a specified percentage of their electricity from renewable sources.
Under the RO scheme, energy suppliers were required to buy Renewable Obligation Certificates (ROCs) from renewable energy generators. The number of ROCs required depended on the size of the supplier and the amount of electricity they supplied.
The cost of the RO scheme was funded through a levy on electricity bills. The amount charged can vary depending on the energy supplier but from April 2022-March 2023 the charges were between £25.96-£27.52 / MWh.
Climate Change Levy (CCL)
The Climate Change Levy (CCL) was introduced in April 2001 and is paid by most businesses and public sector bodies that use energy. The CCL is a tax on energy use that is intended to encourage organisations to reduce their carbon emissions.
The CCL is charged on the units of energy used, such as gas and electricity, and is charged at a rate of £0.00775/KWh of electricity used, or £0.00672 per KWh of natural gas used. Unlike other charges on your bill, the CCL is not set by the supplier but by the government and will be billed at the same rate regardless of who your supplier is.
The money raised from the CCL is used for energy efficiency and renewable energy projects. A part of the revenue is also used to compensate energy-intensive industries for the extra costs they face as a result of the CCL.
There are exemptions from the main rate of CCL depending on how the supply is used, where it is used, and if consumption doesn’t meet De minimis limits.
To find out if you are eligible to be exempt from any CCL charges or to find out more about your bills, don’t hesitate to contact Seemore Energy for more information and guidance.
