Electricity prices in Britain may be almost double those in Germany within three years due largely to the impact of a new tax aimed at supporting renewable power generation, a report by bank Credit Suisse has claimed.
The bank’s analysis showed wholesale prices, which form the backbone of energy bills, would top those in Germany by 85pc in 2016-17 and would be higher in general for the next seven to 10 years.
The bank blamed the roughly fivefold rise in the government’s new tax on carbon-dioxide emitting power generation over the next seven years, while also pointing to Britain’s lack of infrastructure to import power from the European mainland.
Prices in the two countries had tracked one another for years, but they diverged last year as Germany spurred a boom in renewable energy generation by pouring billions into subsidising the green sector.
The Credit-Suisse figures show that in the winter of 2016/17 UK power prices will trade at an 85pc premium to German equivalents, compared with a 25pc divergence currently.
“Our analysis suggests these differentials will continue for the next seven to 10 years,” analysts at the Swiss bank said in a report to clients.
The government introduced the mandatory tax on carbon emissions at £4.94 per tonne of CO2 earlier this year, adding to the carbon charges already in place under the European Union’s Emissions Trading System (EU ETS).
The two costs calculated together will rise to £30 per tonne in 2020, an expense which will significantly increase British power prices, Reuters reported.