Subsidies Galore!
Government subsidy transparency database shows at least £328 billion of active schemes for Net Zero and energy related subsidies.
Introduction
Last week, I came across a government database that I had not heard of before, namely the Subsidy Control Transparency Database. The database was mentioned in an update email from DESNZ, telling me that the results of the Contracts for Difference Allocation Round 6 (AR6) had been loaded on to it. Of course, my curiosity got the better of me and I had to dig in to see what other Net Zero and energy related subsidies might be lurking within.
In the film Whisky Galore, the SS Cabinet Minister runs aground and its cargo of whisky is harvested by the locals. Our cabinet ministers have yet to run aground, but there are plenty of people eager to harvest the subsidies on offer. Over the past two years, I have come across some egregious things in Net Zero world, but even I was shocked by some of the scale of some of the subsidy schemes that have been implemented.
Subsidy Control Transparency Database
Before we dig into the Net Zero and energy related items, we should note some important caveats about the whole database. First, for subsidies recorded as part of the Contract for Difference Scheme (CfD), the government claims the amounts are a “higher end estimate.” Second, it appears as though there are some duplicate entries, for instance SC10301 and SC10069 are both support measures for the development of film audiences, in the sum of £60m with identical start dates. Finally, the budget amounts might be suspect because the most expensive subsidy line is SC1005, UK Film Tax Relief Prolongation which is supposed to cost £2,960bn, that’s more than UK GDP, between April 2020 and April 2025. It is very unlikely that this figure is accurate and so it calls into question the accuracy of other entries in the database.
Of the 1,169 schemes in the database 1,025 of them have active status. Of these, I judged 144 of them to be Net Zero or energy related. The total budget for these items is £328bn, yes billion, with a ‘b’.
However, there are two items related to the Renewables Obligation Scheme, items SC11007 and SC10753 that have budget values of £1 and £0 respectively, so there is reason to believe the budget is understated by a considerable margin because the OBR forecasts that the RO scheme will cost well over £7bn per year for the next few years. The RO scheme has been running for quite some time, so the cumulative subsidies by the end of the scheme must be measured in the high tens of billions, possibly over £100bn.
There are so many schemes that it is difficult to cover them all here, so we will focus on the largest items and highlight some of the most grotesque absurdities.
Electricity Generation Subsidies
The largest cluster of subsidies is for generating electricity. This includes Contracts for Difference (CfDs), Feed-in-Tariffs (FiTs) and ROs. The budget value for CfDs allocated in Allocation Round 6 (AR6), item SC11117, will cost us £45bn over its life. CfDs from AR5 will cost £5bn, AR4 will cost £15bn and CfDs from earlier rounds another £15bn. Some individual offshore windfarms are listed to like Hornsea (£3.4bn), Walney (£2.1bn) and Beatrice (£1.9bn). Wind energy on remote islands is scheduled to receive £15bn of subsides between October 2017 and March 2025. FiTs are calculated to costs us £31bn (Item SC10220).
Subsidies to Mitigate Intermittent Renewables
As well as being expensive, wind and solar renewables are of course intermittent, so we need to pay for backup when the sun is not shining and the wind is not blowing or blowing too hard. The government has created the Capacity Market to provide the backup, but of course it too will require a subsidy estimated at £16.1bn up to mid-December 2024. They obviously need to update this figure because the OBR forecasts the annual cost of the capacity market will rise from ~£1bn in 2023-24 to £4bn by 2027/28. The total forecast to 2029/30 from 2023/24 is over £19bn.
There’s even a £14m subsidy scheme (SC10810) to “support innovative technologies with potential to mitigate impacts of offshore windfarms on UK Air Defence.”
Subsidies for Using Expensive Electricity
The largest single energy related item with the highest value is the British Industry Supercharger Package for energy intensive industries (EIIs) (Item SC11062), with a value of £51bn. This is designed to provide “electricity price support” to around 370 energy intensive businesses in sectors such as steel, paper and batteries. There is another £936m for the Energy Bills Discount Scheme again targeted at EIIs.
We have a total of £87.4bn in subsides for CfDs, another £31bn for Feed-in-Tariffs, £15bn for remote island wind, plus a very large but unknown amount of subsides for Renewables Obligations which are of course making our electricity very expensive. On top of that, there is well over £16bn for the capacity market. To compensate for that, we are going to spend £52bn supporting energy intensive industries. It is simply an absurd government merry-go-round of subsidy on subsidy in a vain attempt to mitigate our insane energy policy. We pay for more than 4,500 people in DESNZ, at a cost of over £400m per year, many of them to devise these parasitic schemes that are destroying the economy.
Subsidies for Biofuels
In addition to the subsidies for electricity generation, there is an insane total of £45bn allocated to various Renewable Heat Incentive (RHI) schemes (Items SC10126, SC10120 and SC10119), which essentially incentivise farmers to burn wood to heat empty sheds out to 2040.
There is also another £2bn for green gas and a further £1.1bn for the Teesside CHP biomass plant.
Subsidies to Make Electricity Generation Less Efficient
But the madness does not stop there, because another £30bn of subsidy has been allocated to the Dispatchable Power Agreement Business Model (Item SC11175), designed to support gas-fired power stations by incentivising the installation carbon capture and storage (CCUS) equipment. There is another £13bn to be spent on other CCUS related subsidies and £2.5bn more for various hydrogen subsidy schemes.
Subsidies to Transform Society
A total of £1.28bn has been allocated to transforming the automotive industry to deliver an electrified supply chain and a further £289m for the Industrial Energy Transformation Fund (IETF).
Several other items relate to decarbonising heat in social housing, worth a total of £2.1bn and a further £450m for boiler upgrade schemes. These schemes are designed to implement the same types of measures that the Government DEEP report calculated would have payback times measured in centuries or millennia.
On top of all that, there is another £567m subsidy for various ultra-low emissions bus projects.
Subsides for Reliable Energy
In contrast to the hundreds of billions to be spent subsidising low density, intermittent power sources like wind and solar, £409m (with an ‘m’) will be spent on various nuclear research and development projects. They have also calculated that the Hinkley Point C nuclear power plant will only cost £130m, which is an anomalously low figure since they are projecting spending of almost £8bn on Sizewell C. Even that figure pales into insignificance compared to the various forms of renewables subsidies.
Conclusions
We must exercise some caution when drawing conclusions because of the obvious howlers in the data. Of course, we are not going to spend £2,960bn on tax relief for the film industry. However, when it comes to the energy related items, it does appear as though the mistakes tend to under-estimate the cost of subsidies. The RO scheme will obviously cost much more than £1 and the Capacity Market will cost more than £16bn.
We see that a truly surreal arrangement of subsidy schemes of ploughing hundreds of billions into renewables, alongside additional tens of billions of additional subsidies to industry to mitigate the impact of the resulting high energy prices. It is completely insane. All this renewable energy largesse contrasts markedly with just £24.6m allocated to the Armed Forces Covenant Fund Trust, mostly capital funding for housing.
Imagine what society would look like if we stopped subsidising incompetent and expensive forms of energy and their parasitic cheerleaders. Bills would be lower; taxes could be lower and more companies would have the confidence to invest in Britain and create jobs. Expensive energy and the accompanying subsidies are killing the economy. We must ditch the Net Zero madness now.
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Thank you David for this real scoop! Not for the first time, Rachel from Accounts' claimed discovery of a £20bn black hole in public finances looks doubtful shall we say. While energy is the focus of our interest here, what you have unearthed is evidence of a vastly bloated government machine that is thoroughly out of control, a dinosaur with a body the size of a lorry and a brain the size of a walnut. As long as there is a widespread belief that the answer is always more government, a paradise for lobbyists and rest-seekers, prospects are poor.
In the unlikely event that Milliband achieves his targets for the addition of wind and solar power by 2030, the UK will have spent enormous sums of money to achieve almost nothing. I explain the effects in this article:
https://johnd12343.substack.com/p/a-question-for-ed-miliband
Imagine if instead, the £328 billion of subsidies were spent on clean, reliable, nuclear power. Most of the cost of nuclear power goes to paying the interest and the payback of the capital costs of building the power stations. The operating costs are only about 1p per Kwh.
If the £328 billion were used to build nuclear power stations, that would eliminate the capital and interest cost burden from the equation, and the country could have cheap, reliable power and profit from exporting the surplus to the rest of Europe when their wind turbines fail.