Green taxes on electricity could be scrapped as part of a sweeping overhaul of the energy market.
Chancellor Rishi Sunak is considering plans to remove taxes on renewable electricity – and switch them to gas.
Industry experts say the typical household’s energy bill would change little because most split their energy use equally between gas and electricity.
Overhaul: Chancellor Rishi Sunak is considering plans to remove taxes on renewable electricity – and switch them to gas
However, as households move to powering more of their homes on electricity – for example, by replacing gas boilers with electric heat pumps – their bills should fall.
For example, a household powered 60 per cent by electricity could save £50 a year under proposals put to Ministers.
Currently, around a third of the cost of electricity is made up of green taxes, which include renewable obligations and feed-in tariffs. But 20 per cent of UK households use no gas and the number is set to grow as gas boilers are phased out as part of the Government’s ten-point plan for reaching ‘net zero’ carbon emissions by 2050.
Energy firms have been lobbying Ministers ahead of a White Paper, which is expected to be published tomorrow.
Greg Jackson, chief executive of renewable energy firm Octopus Energy, said: ‘It is bonkers that the green taxes we pay all fall on our electricity bill – even when our electricity is green electricity.’
He said putting the tax on gas would ‘reward people who make greener choices’.
Other plans under consideration include dynamic pricing, which would allow firms to offer cheaper electricity at ‘off-peak’ times.
Octopus, which has 1.8million UK customers, already offers flexible electricity tariffs to tens of thousands of customers.
It said it could expand the cheap deals to hundreds of thousands of customers if the Government reformed the network charges paid by energy firms. Currently, energy companies are charged a flat fee across the day, but Jackson said network charges should vary.
He added: ‘We need energy firms to be charged more or less by time of day. When energy is abundant, it should be cheap, when energy is not, it should be expensive.’
Firms could then offer more customers cheaper energy at off-peak times, and even pay customers to take surplus energy.
Adrian Letts, chief executive of Ovo Energy’s retail division, said: ‘We need to redesign the way charges are passed on to customers so that choosing low-carbon technology means saving money.’
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