by David Turver
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 £60 million with identical start dates. Finally, the budget amounts might be suspect because the most expensive subsidy line is SC1005, U.K. Film Tax Relief Prolongation which is supposed to cost £2,960 billion, that’s more than U.K. 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 £328 billion – 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. This suggests the budget is understated by a considerable margin, as the OBR forecasts that the RO scheme will cost well over £7 biilion 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 £100 billion.
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 £45 billion over its lifetime. CfDs from AR5 will cost £5 billion, AR4 will cost £15 billion and CfDs from earlier rounds another £15 billion. Some individual offshore wind farms are listed, such as Hornsea (£3.4 billion), Walney (£2.1 billion) and Beatrice (£1.9 billion). Wind energy on remote islands is scheduled to receive £15 billion of subsidies between October 2017 and March 2025. FiTs are calculated to cost £31 billion (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 it too will require a subsidy estimated at £16.1 billion up to mid-December 2024. They obviously need to update this figure, as the OBR forecasts that the annual cost of the Capacity Market will rise from approximately £1 billion in 2023–24 to £4 billion by 2027–28. The total forecast from 2023–24 to 2029–30 is over £19 billion.
There’s even a £14 million subsidy scheme (SC10810) to “support innovative technologies with potential to mitigate impacts of offshore wind farms on U.K. 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 £51 billion. 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 £936 million for the Energy Bills Discount Scheme, again targeted at EIIs.
We have a total of £87.4 billion in subsidies for CfDs, another £31 billion for Feed-in Tariffs, £15 billion for remote island wind plus a very large but unknown amount of subsidies for Renewables Obligations, which are, of course, making our electricity very expensive. On top of that, there is well over £16 billion for the capacity market. To compensate for that, we are going to spend £52 billion supporting energy-intensive industries. It is simply an absurd government merry-go-round of subsidy upon 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 £400 million 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 £45 billion 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 £2 billion for green gas and a further £1.1 billion for the Teesside CHP biomass plant.
Subsidies to Make Electricity Generation Less Efficient
But the madness does not stop there, because another £30 billion 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 of carbon capture and storage (CCUS) equipment. There is another £13 billion to be spent on other CCUS-related subsidies and £2.5 billion more for various hydrogen subsidy schemes.
Subsidies to Transform Society
A total of £1.28 billion has been allocated to transforming the automotive industry to deliver an electrified supply chain and a further £289 million for the Industrial Energy Transformation Fund (IETF).
Several other items relate to decarbonising heat in social housing, worth a total of £2.1 billion and a further £450 million 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 £567 million 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, £409 million (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 £130 million, which is an anomalously low figure, since they are projecting spending of almost £8 billion on Sizewell C. Even that figure pales into insignificance compared to the various forms of renewable 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 £2,960 billion 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 underestimate the cost of subsidies. The RO scheme will obviously cost much more than £1, and the Capacity Market will cost more than £16 billion.
We see a truly surreal arrangement of subsidy schemes, ploughing hundreds of billions into renewables, alongside additional tens of billions in 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 £24.6 million 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.
David Turver writes the Eigen Values Substack, where this article first appeared.
Discover more from Watts Up With That?
Subscribe to get the latest posts sent to your email.
Virtue signalling an important things for UK governments and citizens …
The citizens are rapidly concluding that virtue signalling doesn’t put food on the table whilst politicians are intent in making the U.K. a virtue signalling ‘Superpower’, as it’s the only form of superpower we are capable of becoming.
It will all change at the next election when Nigel Farage and Reform have a landslide victory, but this article gives some indication of the horrific damage that will be done in the meantime.
Note also that most of the damage will be irreversible no matter who forms the next government. There is a kind of investment hysteresis. Deindustrialization is permanent.
Sadly, yes.
Contracts for difference are Govt backed and guaranteed for decades. They have virtually the same status as Govt bonds so once in place you cant cancel them without risking a run on the currency. So even if Reform were to win the next election the UK is a supertanker heading for the rocks. The only benefit is maybe some of those that signed or authorised these contracts can be imprisoned.
The problem is that the British public is totally unaware of the cost of subsidies for wind and solar power. Virtually all of the establishment media have an effective news blackout of the true cost of renewable power in Britain. However, since Labour was elected, I have started to notice some articles appearing in the conservative press questioning the cost and even the point of Net Zero. Even the Conservative party is starting to sound more sceptical about Net Zero. Perhaps the tide is starting to turn.
DESNZ (NSDAP)
These 6th formers in charge could make energy a lot cheaper and this they full well know. They are what I would call ‘anywhere people‘ – as opposed to ‘somewhere people‘; who have a sense nationhood, culture, borders etc. Miliband appears to believe he is some kind of global pied piper, calling the tune to save the planet, to which everyone will follow. What a loon.
On the one hand we have the obligatory u-turn, the fully costed manifesto, er, wasn’t fully costed; either way Labour lied their way in. And then they clamped down on free speech…
“”Pro-Israel speaker blasts ‘deeply shocking’ scenes at Oxford Union after debate descends into chaos””
https://www.msn.com/en-gb/politics/international-relations/pro-israel-speaker-blasts-deeply-shocking-scenes-at-oxford-union-after-debate-descends-into-chaos/ar-AA1vu9eZ
Kindness tolerance and respect revealed as malice, bigotry and contempt.
The older folks get special treatment in the form of heating assistance cuts – cheaper energy would make them obsolete – and while the cuts and raised taxes etc bite we see Miliband et al. have been throwing the tax payer confetti around like there’s no tomorrow.
They want £500 million from the farmers who may well be asset rich, yet are certainly cash poor. Why do they want £500 million?
“”The TaxPayers’ Alliance campaign group have today revealed more than £500 million in foreign aid grants for international farmers. “”
https://www.taxpayersalliance.com/taxpayers_alliance_reveals_more_than_half_a_billion_in_foreign_aid_for_farmers
Parliament is wholly “”anywhere””. The Tories, whether Labour like it or not, have merely passed on the baton and contrary to Labour’s mantra of “Change”, the only real change has been a nosedive in everything from business confidence to standards of living.
Subsidies Galore! And more.
Galore seems similar to Al Gore.
But where are the huge fossil fuel subsidies? Don’t they get a mention anywhere in the database?
Shush!!!! No one counts them here…..
That’s because they don’t exist.
Fossil fuels PAY massive taxes… that is the very opposite of receiving subsidies.
Do you understand the difference between a subsidy and a business tax credit?
When the tax credit is specific to an industry…. it is a subsidy.
“Subsidies typically benefit the recipients of government assistance, who may be businesses, individuals, or industries. These benefits can come in many forms but usually result in some form of economic benefit. Examples include tax concessions, grants, subsidized loans, and direct payments.”
The so-called ‘tax concessions’ merely allow the industry to write off some capital expenditure against immediate taxes, instead of waiting for depreciation schedules. It’s not even close to a ‘subsidy’, it merely delays the payment of taxes, until profits can be made. This is a perfectly normal tax adjustment.
The other so-called subsidy is the refund of duties on fuel that would normally be used to fund road infrastructure (in theory). This is because the equipment isn’t used on roads. Farmers the world over get exactly the same ‘subsidy’ for exactly the same reason.
Climate Cultists like to ignore these basic facts, like so many other basic facts.
Now name some real subsidies. I’ll wait…
“The so-called ‘tax concessions’ merely allow the industry to write off some capital expenditure against immediate taxes, instead of waiting for depreciation schedules. It’s not even close to a ‘subsidy’, it merely delays the payment of taxes, until profits can be made. This is a perfectly normal tax adjustment.”
But it’s not the only one is it? Shall I list the ways the fossil fuel industry is sucking on the teat of the tax payer?
Intangible Drilling Costs Deduction (26 U.S. Code § 263. Active). This provision allows companies to deduct a majority of the costs incurred from drilling new wells domestically. In its analysis of President Trump’s Fiscal Year 2017 Budget Proposal, the Joint Committee on Taxation (JCT) estimated that eliminating tax breaks for intangible drilling costs would generate $1.59 billion in revenue in 2017, or $13 billion in the next ten years.
Percentage Depletion (26 U.S. Code § 613. Active). Depletion is an accounting method that works much like depreciation, allowing businesses to deduct a certain amount from their taxable income as a reflection of declining production from a reserve over time. However, with standard cost depletion, if a firm were to extract 10 percent of recoverable oil from a property, the depletion expense would be ten percent of capital costs. In contrast, percentage depletion allows firms to deduct a set percentage from their taxable income. Because percentage depletion is not based on capital costs, total deductions can exceed capital costs. This provision is limited to independent producers and royalty owners. In its analysis of the President’s Fiscal Year 2017 Budget Proposal, the JCT estimated that eliminating percentage depletion for coal, oil and natural gas would generate $12.9 billion in the next ten years.
Credit for Clean Coal Investment Internal Revenue Code § 48A (Active) and 48B (Inactive). These subsidies create a series of tax credits for energy investments, particularly for coal. In 2005, Congress authorized $1.5 billion in credits for integrated gasification combined cycle properties, with $800 million of this amount reserved specifically for coal projects. In 2008, additional incentives for carbon sequestration were added to IRC § 48B and 48A. These included 30 percent investment credits, which were made available for gasification projects that sequester 75 percent of carbon emissions, as well as advanced coal projects that sequester 65 percent of carbon emissions. Eliminating credits for investment in these projects would save $1 billion between 2017 and 2026.
Nonconventional Fuels Tax Credit (Internal Revenue Code § 45. Inactive). Sunsetted in 2014, this tax credit was created by the Crude Oil Windfall Profit Tax Act of 1980 to promote domestic energy production and reduce dependence on foreign oil. Although amendments to the act limited the list of qualifying fuel sources, this credit provided $12.2 billion to the coal industry from 2002-2010.
Indirect Subsidies
Last In, First Out Accounting (26 U.S. Code § 472. Active). The Last In, First Out accounting method (LIFO) allows oil and gas companies to sell the fuel most recently added to their reserves first, as opposed to selling older reserves first under the traditional First In, First Out (FIFO) method. This allows the most expensive reserves to be sold first, reducing the value of their inventory for taxation purposes.
Foreign Tax Credit (26 U.S. Code § 901. Active). Typically, when firms operating in foreign countries pay royalties abroad they can deduct these expenses from their taxable income. Instead of claiming royalty payments as deductions, oil and gas companies are able to treat them as fully deductible foreign income tax. In 2016, the JCT estimated that closing this loophole for all American businesses operating in countries that do not tax corporate income would generate $12.7 billion in tax revenue over the course of the following decade.
Master Limited Partnerships (Internal Revenue Code § 7704. Indirect. Active). Many oil and gas companies are structured as Master Limited Partnerships (MLPs). This structure combines the investment advantages of publicly traded corporations with the tax benefits of partnerships. While shareholders still pay personal income tax, the MLP itself is exempt from corporate income taxes. More than three-quarters of MLPs are fossil fuel companies. This provision is not available to renewable energy companies.
Domestic Manufacturing Deduction (IRC §199. Indirect. Inactive). Put in place in 2004, this subsidy supported a range of companies by decreasing their effective corporate tax rate. While this deduction was available to domestic manufacturers, it nevertheless benefitted fossil fuel companies by allowing “oil producers to claim a tax break intended for U.S. manufacturers to prevent job outsourcing”.
Copy-pasting stuff you obviously DON’T UNDERSTAND.
NOT ONE OF THE ABOVE IS A DIRECT SUBSIDY
Fossil fuel industries pay vast amounts in tax to Federal coffers.
Renewables only TAKE !!
Subsidies are subsidies. Either you are ok with the tax payer subsidising energy companies, or you are not. Now which one are you? Let me guess. Given your moral compass only goes one way, I’m picking you are fine with fossil fuels sucking on the teat, but not renewables. How surprising….
Fossil fuels are the most taxed resources on the planet. Without the revenues they generate for governments, most countries using these resources would become bankrupt overnight.
I assume that you like your government support? Say goodbye to it without fossil fuels!
Except THEY ARE NOT SUBSIDIES. !
Fossil fuel companies pay massive amounts of tax.
Wind and solar pay NONE…
… they only TAKE and provide very little in exchange.
They are PARASITES… no wonder you worship them.. kindred spirit.
Your moral compass can’t move because it is stuck in the sewer.
You also seem totally clueless that every time a hydrocarbon fuel company explores or drills wells or mines to provide things that are ABSOLUTELY NECESSARY for western society, they take huge risks of capital.
They are then taxed to the wazoo.
All the things mentioned above are totally reasonable costs that should be deducted from the HUGE amount of taxes that these companies get hit for.
Wind and solar.. do they pay any taxes?
… or do they just TAKE from the tax payer, to provide erratic, not-when-needed, junk electricity. !
You know that they would not even exist without stealing from the taxpayer purse, don’t you.
“Credit for Clean Coal Investment”
This comes from the totally idiotic and unnecessary “carbon sequestration” nonsense..
If it is being forced on the coal companies by the government, the government should pay for ALL the cost.
Dropping the idiotic anti-life carbon sequestration nonsense would save the taxpayers well over $1 Billion.
An earlier deduction. Tax is still paid. Not a subsidy.
So, just like depreciation. A perfectly normal tax occurrence. Not a subsidy.
Sounds like a Climate Cult subsidy, for ‘carbon’ sequestration. No information on whether the credits affect future taxes. Probably not, given the Climate Cult MO.
Nonconventional Fuels Tax Credit (Internal Revenue Code § 45. Inactive). Sunsetted in 2014, this tax credit was created by the Crude Oil Windfall Profit Tax Act of 1980 to promote domestic energy production and reduce dependence on foreign oil. Although amendments to the act limited the list of qualifying fuel sources, this credit provided $12.2 billion to the coal industry from 2002-2010.
A reduction of the windfall tax is a subsidy? I think not. It’s a reduction in the taxes on the most taxed resources on the planet, in order to keep US jobs.
Taxes will still be paid. It just moves it to a different (and logically sensible) tax period. Not a subsidy.
So fossil fuel companies are allowed to claim a tax on production as a tax already paid? I get to do this if work and get taxed 8n a country I don’t reside in. Not a subsidy.
Not a fossil fuel company issue. Sounds like a US tax issue. Not a subsidy.
Allowing companies to reduce their corporate tax rate to match foreign corporate tax rates to keep jobs in the US? Sounds like a US tax issue. Not a subsidy.
7/10 for effort.
0/10 for accuracy.
Please, please, try again!
The simpleton has an inbuilt FAILURE rate of some 150% !
“The simpleton has an inbuilt FAILURE rate of some 150% !”
Says the man who thinks it is El Nino what done it.
Thanks David keep up the good work.
Net Zero will do what it says on the tin, collapse the economy to net, zero.
Story tip: https://www.dailymail.co.uk/news/article-14175033/Storm-Darragh-UKs-Biggest-solar-farm-pieces.html
Unremarkable storm trashes biggest UK solar farm and some wind turbines as well.
The best estimate is that this will have caused millions of pounds worth of improvements.
I was on night shift back in October 1987 when the non hurricane hit. It was a night to remember and the journey home was a labyrinth of streets with fallen trees. It took ages to find a way through.
That was a storm. Most people lost a roof tile or three and cashed in on the insurance.
I too was on the nightshift Oct 87 in Oxford, no forecast, first time we realised something was up was being unable to walk between buildings without being blown away. Had to stop the forklift drivers from going outside and then some roof panels started to lift. But the real eye opener was the day shift arriving in drib and drabs when they would normally be all there for the 15 min pass over. Then the drive home avoiding the fallen trees.
The beatings will continue until moral improves.
The insanity will continue until excessive damage is inflicted.
Torches and pitchforks require no subsidies.
all party politicians only ever spend other peoples money. So easy and enjoyable to do. It gives them a sense of power and importance. something they crave..
I hope we can succeed in ending these subsidies in the US but too many Republicans don’t want to cancel programs that put money into their state.
Trump and DOGE have many battles on their hands. History shows the party out of power picks up seats in the midterms. This gives us only 2 years to get things done. Or take more House seats.
Very nice David. Yet another example of grossly incompetent government, pissing away billions on an unneeded and unwanted program. The only money spent on wind and solar should be used to dismantle them. This is not only maddening but embarrassing.
There seems to be a fair amount of discussion below regarding subsidies and taxes . . . all of which wastes everybody’s time.
And this is what I’m talking about . . .
In the UK, over the last 12 months, wind and solar generating facilities combined delivered 11.05GW from an installed combined capacity of 47.9GW. So, over the last 12 months, they operated at a combined load factor – a measure of efficiency – of . . . 23%.
Meanwhile, £BILLIONS – which will turn into £TRILLIONS – is being spent on establishing a generation system which is intermittent, unreliable, fantastically expensive, utterly laughably inefficient, and . . . NON-DISPTCHABLE!!
The only reason you would commit to such stupidity is to gain the benefit VIRTUE-SIGNALLING provides from a largely scientific and engineering illiterate public.
I’m sure a point will be reached when the British public realise that Miliband is a total and utter idiot . . . and hence it won’t be long before he is torn to pieces, limb from limb . . . I hope. And I shall applaud.