{"id":252297,"date":"2023-04-11T12:07:16","date_gmt":"2023-04-11T10:07:16","guid":{"rendered":"https:\/\/climatescience.press\/?p=252297"},"modified":"2023-04-11T12:07:24","modified_gmt":"2023-04-11T10:07:24","slug":"the-obrs-curious-predictions","status":"publish","type":"post","link":"https:\/\/climatescience.press\/?p=252297","title":{"rendered":"The OBR\u2019s curious predictions"},"content":{"rendered":"\n
\"\"<\/figure>\n\n\n\n

<\/p>\n\n\n\n

From Net Zero Watch<\/a><\/p>\n\n\n\n

By Andrew Montford<\/em><\/p>\n\n\n\n

\"\"<\/figure>\n\n\n\n

The Office for Budget Responsibility (OBR) recently published its predictions<\/a> about how the cost of environmental levies might change over the next few years. The picture painted was somewhat less appalling than it might have been because, or so the OBR claims, renewables generators are going to be paying back into the Contracts for Difference (CfD) scheme at a steadily increasing rate.<\/p>\n\n\n\n

The CfD scheme essentially gives generators a fixed price for power. If market prices are below the agreed \u201cstrike price\u201d they get a subsidy for the difference, but if they are above it, they have to pay the difference back into the scheme. In five years\u2019 time they will allegedly be handing back nearly \u00a34 billion per year.<\/p>\n\n\n

\n
\"\"<\/figure>\n<\/div>\n\n\n

However, the forecast of a steadily increasing repayment involves some remarkable assumptions about the future. Let me explain why.<\/p>\n\n\n\n

The pattern of steadily increasing repayments predicted by the OBR must be due either to increasing volume \u2013 in other words, an increasing capacity of generation operating in the CfD scheme \u2013 or to market prices rising further and further above strike prices.<\/p>\n\n\n\n

A moment\u2019s reflection shows that increasing volume cannot be the explanation. A generator will only sign up for the CfD scheme if market prices are low and are expected to remain low. Otherwise, they will not sign up. This is precisely what we have seen since the start of the energy crisis. With high market prices readily available, almost no new capacity has become operational inside the scheme. That\u2019s because doing so would probably involve handing cash over to consumers, and what business likes to do that?<\/p>\n\n\n\n

Could the OBR be thinking that lots of generators will sign up for the scheme as the result of a fall in market prices? No, because if prices are low then the scheme will be paying out subsidies. A fall in prices followed by a rise? That doesn\u2019t work either, because it doesn\u2019t equate with the OBR\u2019s prediction of steadily increasing repayments.<\/p>\n\n\n\n

With market prices high, and expected to go higher, it is therefore extraordinarily unlikely that any further capacity will be added to the scheme. The OBR must therefore be basing their prediction on an expectation of rising market prices for those generators who are already signed up.<\/p>\n\n\n\n

But how high would those prices have to go to explain to get to the \u00a33.8 billion figure for 2027\/28? If no capacity is added to the fleet in the next six years \u2013 as seems likely \u2013 then we can assume that it will be generating the same amount of electricity in 2027\/28 as it did in 2022. We can also make a guesstimate that strike prices will increase by about 25% over the same period, roughly the same has they have done over the last five years. If those figures are correct, then the OBR\u2019s figure of a \u00a33.8 billion payback in 2027\/28 requires market prices to average over \u00a3500\/MWh, more than twice what they were during the energy crisis last year.<\/p>\n\n\n\n

Of course there is a third explanation for the OBR\u2019s numbers, which is that they are entirely baseless \u2013 a work of fiction designed to make the burden of green levies look a little less appalling than it otherwise would. But the Westminster machine would never do something so deceptive\u2026would they<\/a>?<\/p>\n","protected":false},"excerpt":{"rendered":"

The Office for Budget Responsibility (OBR) recently published its\u00a0predictions\u00a0about how the cost of environmental levies might change over the next few years.<\/p>\n","protected":false},"author":121246920,"featured_media":252304,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_coblocks_attr":"","_coblocks_dimensions":"","_coblocks_responsive_height":"","_coblocks_accordion_ie_support":"","_crdt_document":"","advanced_seo_description":"","jetpack_seo_html_title":"","jetpack_seo_noindex":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2},"jetpack_post_was_ever_published":false},"categories":[1],"tags":[691818270,691818130,691818269],"class_list":{"0":"post-252297","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","6":"hentry","7":"category-uncategorized","8":"tag-contracts-for-difference-cfd","9":"tag-renewables","10":"tag-the-office-for-budget-responsibility","12":"fallback-thumbnail"},"jetpack_publicize_connections":[],"jetpack_featured_media_url":"https:\/\/i0.wp.com\/climatescience.press\/wp-content\/uploads\/2023\/04\/0Net-Zero-Buildings.jpg?fit=1600%2C1124&ssl=1","jetpack_likes_enabled":true,"jetpack_sharing_enabled":true,"jetpack_shortlink":"https:\/\/wp.me\/paxLW1-13Dj","jetpack-related-posts":[{"id":252545,"url":"https:\/\/climatescience.press\/?p=252545","url_meta":{"origin":252297,"position":0},"title":"Andrew Montford: The OBR\u2019s curious predictions","author":"uwe.roland.gross","date":"12\/04\/2023","format":false,"excerpt":"Could the OBR be thinking that lots of generators will sign up for the scheme as the result of a fall in market prices?","rel":"","context":"In \"CfD\"","block_context":{"text":"CfD","link":"https:\/\/climatescience.press\/?tag=cfd"},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/climatescience.press\/wp-content\/uploads\/2023\/04\/0why-we-need-to-invest-in-renewables-solar-wind-array-1920-1080.jpg?fit=1200%2C675&ssl=1&resize=350%2C200","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/climatescience.press\/wp-content\/uploads\/2023\/04\/0why-we-need-to-invest-in-renewables-solar-wind-array-1920-1080.jpg?fit=1200%2C675&ssl=1&resize=350%2C200 1x, https:\/\/i0.wp.com\/climatescience.press\/wp-content\/uploads\/2023\/04\/0why-we-need-to-invest-in-renewables-solar-wind-array-1920-1080.jpg?fit=1200%2C675&ssl=1&resize=525%2C300 1.5x, https:\/\/i0.wp.com\/climatescience.press\/wp-content\/uploads\/2023\/04\/0why-we-need-to-invest-in-renewables-solar-wind-array-1920-1080.jpg?fit=1200%2C675&ssl=1&resize=700%2C400 2x, https:\/\/i0.wp.com\/climatescience.press\/wp-content\/uploads\/2023\/04\/0why-we-need-to-invest-in-renewables-solar-wind-array-1920-1080.jpg?fit=1200%2C675&ssl=1&resize=1050%2C600 3x"},"classes":[]},{"id":230851,"url":"https:\/\/climatescience.press\/?p=230851","url_meta":{"origin":252297,"position":1},"title":"Fuel Duty Hike Planned\u2013To Subsidise EVs","author":"uwe.roland.gross","date":"24\/11\/2022","format":false,"excerpt":"In the absence of any road pricing scheme any time soon, it would appear that other car drivers will have to pay more at the pump to subsidise EV owners.","rel":"","context":"Similar post","block_context":{"text":"Similar post","link":""},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/climatescience.press\/wp-content\/uploads\/2022\/11\/0image-98.png?fit=762%2C768&ssl=1&resize=350%2C200","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/climatescience.press\/wp-content\/uploads\/2022\/11\/0image-98.png?fit=762%2C768&ssl=1&resize=350%2C200 1x, https:\/\/i0.wp.com\/climatescience.press\/wp-content\/uploads\/2022\/11\/0image-98.png?fit=762%2C768&ssl=1&resize=525%2C300 1.5x, https:\/\/i0.wp.com\/climatescience.press\/wp-content\/uploads\/2022\/11\/0image-98.png?fit=762%2C768&ssl=1&resize=700%2C400 2x"},"classes":[]},{"id":416664,"url":"https:\/\/climatescience.press\/?p=416664","url_meta":{"origin":252297,"position":2},"title":"EXCLUSIVE: UK Office of Budget Responsibility\u2019s Latest Climate Fear Mongering Claims Based on Junk Findings from Retracted Nature Paper\u00a0","author":"uwe.roland.gross","date":"09\/12\/2025","format":false,"excerpt":"One of the biggest scandals so far in climate science publishing has suckered in a number of government policy advisers around the world including the UK Office for Budget Responsibility (OBR). 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