Content Coms Explains: The Levy Control Framework

Q: What is the Levy Control Framework (LCF)?

A: The LCF was created by the Coalition Government in 2011. It is a system which oversees how much is spent on decarbonising the UK.

Q: What does LCF control?

A: LCF controls the Feed-in Tariff, the Renewables Obligation and Contracts for Difference. It is meant to cap how much money the Department for Energy and Climate Change (DECC) can take from energy bills to spend on these subsidies.

Q: Who does LCF affect?

A: LCF impacts on any business affected by the Feed-in Tariff, the Renewables Obligation and Contracts for Difference.

Q: What are the figures involved?

A: The LCF’s budget is a maximum £7.6bn in 2020. The scheme is presently set to run to 2020/21. The hope is LCF cash will help deliver 33% of UK energy from renewables by 2020/21. This should be enough to meet EU targets for renewable energy.

Q: Where is LCF now?

A: The Conservative Government is due to set forthcoming LCF budgets later in its term. LCF is presently mired in controversy.

Both industry commentators, politicians and think-tanks have criticised the scheme. Opinion widely supports the view it has been heavily overspent by DECC, and there is no money left.

Q: How bad is the LCF overspend?

A: Policy Exchange’s head of environment and energy, Richard Howard, predicts existing projects could take up £6.6 of the £7.6 cap in 2020. But, we are only in 2015. This means there is hardly any money left to fund the next five years of UK green energy subsidies.

Climate Change Capital supports this, predicting £1bn p.a. to be left for 2020/21 and £300m p.a. to be left for 2018/19.

Q: What happens next?

A: Commentators are urging Climate Secretary Amber Rudd to make fixing LCF a key priority. Doing so may well involve cutting subsidies for low carbon generation.

Large scale projects, especially wind energy, could get the axe. But smaller projects across the board may too find promised cash simply disappears.