Dash for gas not low-carbon power is pushing up energy bills, says CCC

by Search Gate staff. Published Thu 15 Dec 2017 10:33, Last updated: 2017-12-15
Gas power blamed for rocketing household energy bills

The first comprehensive analysis of the impact of low carbon policies on household energy bills has found the UK's drive for gas-sourced power and not green policies is behind recent price rises.

A report published today by the UK's climate change watchdog blames gas prices and not renewable energy for the hike in consumers' bills.

In the first comprehensive study on the impact of carbon reduction policies on household energy bills to date and over the next decade, the Committee on Climate Change (CCC) found that costs associated with the wholesale gas market have been responsible for more than three quarters (84 per cent) of the rise in bills over the last six years.

By comparison, its analysis revealed that carbon reduction measures have been responsible for 16 per cent of the rise in bills over the same period.

Household fuel bills have increased by as much as 20 per cent this year. This has led to claims the cost of implementing UK environmental policies is behind the increases. But today, the CCC said its findings "disprove" such assertions.

As well as impacts to date on household bills, its report, 'Household Energy Bills – Impacts of Meeting Carbon Budgets’, studied the impact of green policies on household fuel bills over the next decade and found that measures to shift the UK onto a low carbon footing would add around £110 to household bills between now and 2020.

The CCC pointed out that the increase was far less than some dramatic claims being made about decarbonising the UK’s energy infrastructure. Such claims have intensified over recent months and have even included the Chancellor George Osbourne stating that green policies are pushing up the cost of household energy bills.

The CCC analysis looked at the impact of carbon reduction policies on household bills up to last year from Britain’s 21 million dual-fuel energy customers, which make up 84 per cent of household energy bills. For these households, it found energy bills increased by £455 from around £605 per household in 2004 to £1,060 in 2010.

But it found that £380 (84 per cent) of that increase was nothing do to with low carbon measures, but instead was related to a combination of the price of gas and supplier costs (£290), increasing transmission and distribution costs (£70) and VAT (£20). The cost of policies to reduce carbon emissions accounted for £75 (16 per cent) of the price rise, including £30 to support investment in low carbon power generation, and £45 for funding energy efficiency improvements in homes.

"We were keen to provide a dispassionate analysis of household bill impacts in what has become a politically controversial area," Lord Adair Turner, chair of the Committee on Climate Change said. "We found that bills have increased primarily in response to increased wholesale gas costs and not due to environmental policies."

Looking forward, Lord Adair said the CCC anticipated investment in low carbon power capacity would increase the average household energy bill by around £100 over the next decade. Measures to improve energy efficiency in homes are likely to add another £10 to the average household bill. But Lord Adair said if new policies to stimulate energy efficiency improvement, such as the Green Deal, were introduced "then bills in 2020 could broadly be contained at current levels."

The CCC findings follow analysis published by the Department of Energy and Climate Change last month that showed that the Government’s low carbon policies would keep household energy bills on average seven per cent lower by 2020 than if nothing were done.

The Committee said impacts on bills up to 2020 for households with oil, liquid petroleum gas or solid fuels would be broadly similar to those of dual-fuel gas/ electricity households. However, for those homes run on electric heating, the costs associated with low carbon measures will be "disproportionately" greater, it noted.

Commenting on the CCC's findings, Juliet Davenport, CEO and founder of Good Energy, said: “It’s good to see the Committee putting the record straight and these figures clearly show how our continued dependence on fossil fuels is costing us dear. They also put to bed many of the myths about the cost of investing in a new generation of infrastructure that harnesses the renewable energy resources with have in the UK.

“That investment will benefit us in the long run, providing security of supply, helping deliver more stable energy prices and slashing our carbon emissions. That’s good for households, good for businesses and good for the economy.”

Dr Gordon Edge, RenewableUK’s Director of Policy, added “This important analysis by the Committee on Climate Change reaffirms the impact of over-reliance on fossil fuels on our energy bills, and demonstrates the need to move towards a power supply less dependent on a finite resource.

“No-one is claiming that supporting renewable energy up to the point when it becomes competitive in the market place will be free – but the cost of not doing so would be far higher. Over the last decade, rising fossil fuel prices have pushed up energy bills by more than double the amount that low-carbon investment is expected to do so in this one.

“And that extra £100 brings us more stable prices, a UK industry, and reduced dependence on imports, making investment in renewable energy excellent value for money.”

The WWF said that the CCC had injected a “note of sanity” into the debate around household energy bills.

Nick Molho, head of energy policy at WWF-UK said: “It’s great that the CCC has injected a note of sanity into the fevered debate around household energy bills and confirmed what everyone knew – the cost of fossil fuels are forcing up energy bills.

“In reality though, there was never a debate here - it was a mirage. Those opposed to renewables have simply pushed a myth – that the cost of ‘green policies’ and support for renewables was driving up energy bills. This deliberate attempt to pervert the debate and mislead consumers has also damaged confidence in an industry that can provide a major boost to UK investment and economic growth.

“It is the UK power sector’s heavy reliance on gas and other fossil fuels – not renewable energy - which has overwhelmingly driven recent price hikes. The reality is that renewables offer us the best chance to diversify our energy sources away from our excessive over-reliance on gas and to create a substantial renewable energy industry here in the UK.”

WWF also said that the Committee was right to highlight the importance of energy efficiency in limiting future energy costs for consumers. Whilst WWF welcomes the government’s Green Deal and Energy Company Obligation, both aimed at saving money on bills through helping consumers to make their homes more energy efficient, it is clear that a step change is needed in ambition on energy efficiency including policies to help reduce electricity consumption as well as gas consumption.

Nick Molho added: “We need a coherent energy policy that places the same amount of importance on reducing our demand for energy as it does on supporting low-carbon power. Energy efficiency is clearly key to achieving a long-term, sustainable reduction in our energy bills. We urge the Government to ensure that proposals for the forthcoming Energy Bill include policies to drive more efficient use of electricity.”

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