The public service obligation (PSO) levy, which is responsible for subsidizing renewable energy operators, will be reduced to zero for the upcoming year. This decision comes as a result of the substantial profits made by wind and solar farm operators in the previous year. Instead of receiving further subsidies, these operators were required to return some of their excess profits to electricity users in the form of a credit.
The PSO levy, imposed on electricity bills, guarantees a fixed price for the electricity generated by renewable energy sources. However, due to the recent decline in wholesale gas prices, the revenues received by these generators have also decreased.
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The Commission for Energy Regulation (CRU), responsible for setting the PSO levy, has stated that households will not receive any credits from the levy fund this year. Currently, households are benefitting from a monthly credit of nearly €13 until September, resulting in a total payout close to €90.
Renewable energy generators have been obligated to contribute to the levy fund in order to compensate for their windfall gains. These gains were driven by high wholesale electricity prices, mainly influenced by surging gas prices. However, with recent declines in gas prices, the prices received by renewable energy generators have also dropped.
John Melvin, the CRU director of wholesale markets, explains that the inverse relationship between the PSO levy and wholesale fuel costs has greatly diminished the benefits for customers this year. The CRU forecasts that renewable energy generators will contribute approximately €67.5m to the levy fund, which will be retained to offset future increases in the PSO levy.
Although the reduction of the PSO levy may initially seem like good news, experts caution that it is a result of persistently high wholesale electricity prices. Renewable energy operators, particularly wind farms, receive guaranteed prices for their electricity production through the PSO scheme. Typically, these prices have exceeded the overall wholesale market prices, leading to the need for additional subsidies through the PSO levy.
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