Should Government rethink energy bill levies?
We explain why unfair electricity bill levies are delaying the green transition
The economic opportunities from a clean energy transition have become a strong focus by the government in recent weeks, particularly with the launch of a British Industrial Competitiveness Scheme. The plans propose cutting energy costs for businesses by exempting them from green levies to help them compete with international market rivals.
Whilst unlocking the UK’s economic potential is undoubtedly welcome, policy costs placed disproportionately on electricity bills remain a blocker to progress, as highlighted by the latest Climate Change Committee report.
In this article, Good Energy emphasises a fairer approach to lowering energy bills for households and businesses.
Is it time for the government to rethink putting levies on energy bills?
The government has unveiled a ten-year plan, via its new Industrial Strategy, to boost investment, create skilled jobs and make Britain the best place to do business. This is a welcome development, providing the stability essential for encouraging clean energy investors to grow here in the UK.
A key announcement from the plan includes a new British Competitiveness Scheme, which could cut energy costs by up to £40 per megawatt hour for over 7,000 manufacturing firms from 2027.
The government suggest this would be achieved by exempting eligible firms from levies on bills, including the Renewables Obligation, Feed-in Tariffs and the Capacity Market.
The government will shortly be consulting on some of the key details of this scheme, not least which organisations will be eligible and who will pay for these levies, which represent important financial support for renewable energy infrastructure.
To Good Energy, and to the Climate Change Committee – these proposals do not go far enough.
Levies should be moved into general taxation for all
For domestic households, social and environmental levies currently sit disproportionately on electricity bills compared to gas, and this is a major barrier to wider electrification. As part of their progress report to Parliament published in June 2025, the independent Climate Change Committee have called for their removal in order to speed up heat pump and electric vehicle adoption.
Good Energy has long advocated that the government should move these policy costs off bills and onto general taxation. We have always stated that shifting these levies would be a fairer way to pay for the green infrastructure that is essential for decarbonising our energy system. This same principle applies if the government is considering making high energy use industrial consumers exempt from levies.
We should be working together to ensure that heating a home with a heat pump is significantly cheaper than gas. Moving these levies would make heat pump running costs much more competitive compared to gas. The current imbalance has been driven in large part by the placement of environmental and social levies on electricity bills, essentially creating an incentive to emit carbon.
The government is championing heat pumps through various initiatives, but it currently is not doing anything to address their running costs. Moving levies into taxation would bring energy bills down for everyone – whether they are ready to make the switch to cleaner heating or not. A guaranteed win for the government’s goals on clean power, heat decarbonisation and lowering energy bills.
This is not something that can be said for another huge energy policy change the government is considering — zonal pricing.
Now is the time
With electricity almost four times expensive as gas, and the government championing transitions to electrified forms of heating and transport, it is essential there are no further delays in addressing this imbalance.
The government has rightly recognised that many large organisations face a competitive disadvantage due to high electricity costs. Shifting levies off bills can help improve this.
But let’s not forget households as well. Bringing down electricity prices can incentivise more households to install heat pumps and get electric cars, alleviate fuel poverty for homes that use direct electric heating, reduce emissions from homes, and reduce our reliance on gas from overseas.
