What a huge jump in renewable cost means for your budget

Don’t you just hate it when you receive a bill and look to the section labelled ‘Additional Charges’ where there are a number of costs which are hard to understand? For example, the fuel surcharge airlines charge when you purchase flight tickets.

Here’s an interesting fact: due to agreed government initiatives, did you know that approximately 20% of your electricity price goes on renewable incentives?

Unfortunately, when it comes to your electricity bill there are some charges, often levied by a third party like the government, that suppliers must pass on to their customers.

This is where we feel our  award winning Fixed + Peace of Mind contract really comes into its own,  providing our customers with the confidence of knowing that their prices remain fixed for the duration of their contract and giving them budget certainty.

Stay with me and I’ll go into this in a bit more detail and tell you what we here at EDF Energy are doing to help manage these costs for our customers. 

Big targets for 2020

The EU's Renewable Energy Directive has set a target of 20% final energy consumption from renewable sources by 2020. 

The UK government is committed to sourcing 15% of all heat, transport and electricity usage from renewable sources by 2020. Of these, electricity will meet the largest share with over 30% of all electricity expected to be sourced from renewables by the end of the decade. 

Therefore, the government has committed to running incentives to support renewable electricity generation including:  (i) Contracts for Difference (CfD); (ii) Feed-in Tariff (FIT); and (iii) the Renewable Obligation (RO). 

The graph above shows how steeply these costs are expected to rise between now and 2020. 

Renewables Obligation (RO) Costs

The RO is a financial obligation on Suppliers to support renewable electricity generators. The degree of support they must provide is set out by the government each year. The monies collected from the RO charge on energy users are ultimately distributed to large-scale renewable electricity projects and also certain small-scale projects.  For the current period (April 15 – March 16) the charge is £12.86/MWh.

First set in 2002, the RO charge was initially fairly stable and predictable.  However, a rapid increase and broadening of renewable generation has made forecasting the RO charge much more challenging.

Whilst our initial forecast for the next period (April 2016 – March 2017) already suggested an increase, due to a change in government forecasts we now know the new rate is going to be higher than most people were expecting.  

Although this isn’t great news for us, we want to assure our customers who are currently on our Fixed + Peace of Mind contract that we will not be passing these additional costs on.

What we are doing to help

Customers on EDF Energy’s Peace of Mind contract are protected against cost increases like this. Our ‘Fixed means Fixed’ promise is part of what makes us the Feel Better Energy company and is clearly in the interests of our customers.

Unlike other fixed products in the market, EDF Energy’s Fixed + Peace of Mind product has no hidden charges or claw back clauses. Can you say that about your current contract?

Whilst many other suppliers claim that their prices are fixed, just double-check and ask the question, or take a thorough look through their terms and conditions to ensure this is the case. Otherwise you could be in for a shock when you receive your bill.  

With EDF Energy, we pride ourselves on our ‘It’s fixed’ Commitment(1) and we have again demonstrated that our fixed prices are fixed.

Bio

Posted by Philip Valarino, Senior Manager, Business Sales

Phil Valarino heads up EDF Energy’s Business Sales. The team undertakes an extensive range of contracting and account management activity across a broad spectrum of B2B customers, both in UK and Europe. He has over ten years of experience across the energy industry having held various positions across Sales & Marketing both in the UK and France.

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