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Mail fuels fears over energy bills but where’s the research to back them up?

  • 15 Jun 2011, 12:00
  • Christian

Household energy bills are being inflated by subsidies for "green" renewable energy according to a slew of stories in the Daily Mail, followed up by the Telegraph and based on claims made by Dr Benny Peiser, the director of the Global Warming Policy Foundation.

Reduced household incomes coupled with rising energy bills - with all major energy companies increasing their bills, and the announcement from Scottish Power that its domestic energy bills will rise by £200 - has meant that rising fuel bills will be a major anxiety for millions of people.

The GWPF are blaming price rises on green policies. Since 2002 energy bills have risen sharply. For the most part these increases are due to wholesale gas price rises, which also feed through into electricity prices.

However, as renewable targets and energy efficiency policies have become more ambitious a rising fraction may be due to green policies. The question is, how much?

Dr Peiser says green taxes currently make up between 15 and 20 percent, or from £154 to £206 of an average household's combined gas and electricity bill.

Despite the significant space and editorial support given to this story, the Daily Mail fails to provide sources for these figures in its front-page article on June 9 or any of the subsequent comment articles that have followed.

So what figures is Dr Peiser using? First of all, he states that the average household spends £608 a year on gas and a further £424 on electricity, making for an average combined bill of £1032.

These numbers are the same as those presented by energy regulator Ofgem as an average UK fuel bill. Peiser's claim that green measures cost between £154 and £206 across these two bills is then based on his estimate of green costs as between 15 and 20 percent of domestic energy bills.

However, the same Ofgem document demonstrates that "environmental costs" account for just four percent of gas and 10 percent of electricity bills (on page 1.)

The Ofgem figures do not include the impact of the European Emissions Trading scheme (ETS), which Dr Peiser estimates at an average of £100 a year. However, in January 2011 they calculated that the ETS contributes just £13 a year to the average bill (see table below).

Overall this brings green costs to £80 a year, or around 8% of the average gas and electric bill.

Carbon Emissions Reduction Target (CERT)

Gas: £24

Elec: £24

Community Energy Saving Programme (CESP) 

Gas: £1.10

Elec: £1.90

The Renewables Obligation (RO)

Gas: Nil

Elec: £16

Feed-in Tariff Scheme (FITs) 2011 current year figure

Gas: Nil

Elec: Negligible

EU Emissions Trading Scheme (ETS) 2011

£13

 

Ofgem via email

When queried last week about his figures by fact checking website Full Fact, Dr Peiser referred their researcher to figures from the Department of Energy and Climate Change, who in 2010 published comprehensive information relating to the impact of green policies on household and commercial energy bills (PDF).

At first glance, DECC 2010 figures appear to be slightly higher than Ofgem data. According to DECC 2010 green policies were increasing the average domestic electricity price by 14 percent.

It may be that these are the figures Dr Peiser is quoting in the Mail - judiciously rounded up to 15-20%. But the figures quoted are for electricity only - not gas. The equivalent figures for gas prices are much lower - 4% (for domestic customers) and 6% (for non-domestic.) Applying the higher electricity figures to the whole bill - both gas and electric - gives a significant cost overestimate.

In addition, the DECC figures are for prices not bills. Some of the green policies paid for by government are designed to reduce energy consumption, reducing bills. In fact, the DECC report notes that even if the unit price of electricity or heat goes up, green policies can cut customer's bills through energy efficiency measures. So while policies place upward pressure on price they also place downward pressure in energy use - and these partially cancel out.

DECC calculate the gross increase to household bills from green measures in 2010 at around four percent - obviously significantly less than 15-20 percent.

So, in summary, the Ofgem figures indicate that green measures add around 8 percent to the average bill, but these figures to not appear to take into account that green polices can also cut bills for householders.

DECC calculate the gross increase is four percent. None of this takes into account of the long-term impact on bills of the rising cost of fossil fuel, which the green measures are intended to offset by encouraging more efficient use of energy and promotion of renewable power.

We asked Dr Peiser on Monday for clarification on his figures, but had received no reply at the time of publication. If the GWPF can't transparently justify their claim, they must withdraw it.

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Updated 12.15pm June 16th - I had quoted DECC figures for the amount green policies were increasing gas prices as 3% (for domestic customers) and 5% (for non-domestic) - it's actually 4% and 6% respectively.

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