The cost of supporting new renewable energy stations to meet the UK’s carbon targets will add nearly £100 to the average household energy bill.
According to a government advisor, the increase is likely to be seen before the end of this decade.
But the Committee on Climate Change said it expected the increase to be offset by savings as people switched to more efficient fridge freezers, LED bulbs and better boilers.22
The committee, a body of renewable energy experts set up under the Climate Change Act to advise the government, found that a rise of £105, or 9%, to the average £1,160 dual fuel bill in 2016 was down to green policies. These included subsidies for windfarms and solar power through schemes such as the Renewables Obligation. A report by the committee predicts that meeting the UK’s carbon targets would see the cost of the subsidies rise to £200 of an average bill of £1,350 by 2030.
It’s not the economy (tariffs)
However, other factors were involved in the net increase. The committee also calculated that rising wholesale energy costs and other issues will add more than £200 a year to bills. Whilst an ongoing switch to more energy-efficient appliances and gadgets is expected to save £150.
Matthew Bell, chief executive of the committee, told the Guardian that he thought it was worth spending the money on climate policies. “The reason we’re acting to reduce our emissions is climate change poses real risks, real risks to the UK as well as round the world.”
The cost was relatively modest, he said, adding: “What our analysis says quite clearly is that as a proportion of total energy costs, climate costs are a small minority portion. The vast majority of your energy bill is accounted by other things, like wholesale costs and transmission costs.”
Five of the big six energy suppliers announced price hikes over the winter, sparking calls for a cap on bills
Three energy companies outside of the major supplier group, including Bristol-based Ovo, which has 680,000 customers, and smaller suppliers Octopus and Utility Warehouse, signalled their support on Thursday for a relative price cap. The cap has been proposed by the Conservative MP John Penrose and would limit the gap between the best and worst deals on the market. We have covered likely government action on this topic several times in previous articles.
Some of the energy companies, such as German-owned E.ON, laid the blame for their rises partly on the cost of supporting green policies. But the Committee on Climate Change said that such policies had in fact shaved £290 a year off the average household energy bill between 2008 and 2016, because they had encouraged a shift to A-rated fridge freezers, condensing boilers and a swing away from incandescent lightbulbs to energy-saving ones.
Bell said that future progress on more energy-efficient appliances was slowing slightly, but there was still potential for huge savings. “We’re still seeing only 1% of lighting being LEDs. And what we’ve not factored in at all is what IT will do for how we manage energy in our homes.”
UK Energy bills not as expensive as most?
The committee said British households’ energy costs are not high compared to the rest of Europe. Residential electricity prices are below average, and gas prices the third lowest among 15 EU countries.
Despite the government recently announcing a review into energy costs for businesses, the committee said climate policies were adding relatively little to companies’ bills and had not affected UK plc’s competitiveness.
Rebecca Williams, an energy specialist at WWF, said: “This report shows that energy companies are wrong to blame the increase in energy bills solely on UK government policies. It is clear that the main driver here is rising fossil fuel costs.”
Conclusion: Renewable energy is likely to lead to a fall in energy prices long-term, but prices are going to continue to fluctuate for a while yet
At AIswitch, we recognise the growing interest in switching to a green or renewable energy tariff. We always include a green option with our recommendations, making sure that people can opt into renewable energy tariffs. It can be easy, being green.
We define these green options as companies whose entire generation mix is derived from 90% or greater renewable sources. We do include small suppliers who haven’t been operating long enough to have a full view of their generation mix but have expressed a strong intent to do so.
Additionally, we exclude so-called green suppliers who are white-labels of larger suppliers who do not meet this definition.
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