Telegraph £300 energy bill headline makes the usual mistakes
- 05 Sep 2011, 16:30
- Robin Webster
What will affect the future cost of our energy? The latest move
in the campaign to shape public opinion on fuel bills come today
with the publication of a
front-page headline by the Telegraph - "Environment policy
reforms to add £300 to energy bills". This has been followed up by
a wide range of media outlets including
the Mail and
the Guardian.
The story is based on a leaked briefing from Senior Energy Advisor
to David Cameron and
former BP executive Ben Moxham - printed by the Telegraph
here.
The briefing starts
"Prime Minister, Your seminar on Green Deal implementation raised
a number of wider questions about the impact of energy and climate
change policies on energy prices, the impact of our renewables
target in particular, how well the electricity market is operating,
and what can be done to minimise consumer bill increases in the
short and medium term."
Later on it says
"DECC's analysis finds:
Our policies would have a relatively small impact on household gas
prices
Our policies would increase household electricity prices by 25% in
2015 and 30% in 2020 compared to what they would have been in the
absence of policies".
and later
"DECC's mid-case gas price scenario sees policies adding 30% to
consumer energy bills by 2020 compared to a world without
policies."
The Telegraph use this line as the justification for their '£300'
headline figure.
We have covered the use (and misuse) of these kind of analyses in
the past, and here again there are two issues which can be raised
with the Telegraph's interpretation of the document.
This first appears to be a mistake. The price rise Moxham quotes
seems to be for electricity bills. As more of an average energy
bill is spent on gas than electricity, this overinflates the
headline figure -
Damien Carrington notes in the Guardian:
"A source in Westminster tells me that Moxham was clearly
referring to electricity alone when he suggested a 30% rise by
2020, meaning the rise would be about £135, but that the sentence
was sloppily written."
£135 is (very approximately) 13.5% of current energy bills - to
map the overall effect, you'd need to look at gas as well.
The second issue is a legitimate disagreement between DECC and
Moxham, which isn't reflected in the Telegraph's headline.
DECC base their analysis of future energy bills on the assumption
that energy efficiency measures (for example increased home
insulation) will reduce household consumption of energy - so while
prices go up energy bills may remain steady or even go down. While
DECC predict that climate change and energy policies will cause
gas prices to go up by 18% and electricity prices by 33% by 2020,
they estimate (as of July 2010) that because of reductions in
energy use
"compared to the counterfactual scenario in which climate change
and energy policies do not have an impact on energy bills, on
average, domestic energy
bills will be 1% higher in 2020."
Moxham's briefing notes DECC's argument, but rejects it:
"While the rest of the analysis seems broadly plausible, we find
the scale of household energy consumption savings calculated by
DECC to be unconvincing. Their analysis may be based on the
assumption that many energy efficiency measures will be taken up
without subsidy, whereas we believe a large number of measures will
need to be subsidised given, the hassle factor and other barriers
to consumer uptake identified at the Green Deal implementation
meeting. We are interrogating DECC's assumptions further."
This seems reasonable, and as
BusinessGreen pointed out today
"even green NGOs have questioned whether the proposed Green Deal
loan scheme can, in its current form, deliver the full-blown energy
efficiency revolution required to help cut average energy
bills."
However, it's worth noting that in rejecting DECC's figures on the
basis of Moxham's query, the Telegraph's headline figure of £300
effectively assumes any energy efficiency measures or policies will
have no effect whatsoever on reducing household energy bills.
DECC"s response (in the Guardian) is fairly robust:
"Reforms will not add £300 to bills. Our policies will both add
and subtract from future bills because we need to build new
reliable energy sources to keep the lights on, but we'll also be
helping people to cut their bills through greater energy
efficiency".
They pointed out to us that:
"Sustained higher prices for fossil fuels reduce the cost of some
energy and climate change policies, lowering the cost passed onto
consumer bills. For example, at an oil price of around $150 per
barrel in 2020 and gas price of around 120 pence per therm, climate
change and energy policies would have the effect of reducing bills
in 2020 by around 5% compared to a bill excluding these
policies."
In other words, fossil fuel price increases and volatility will
increase energy bills, and measures which reduce consumption and
shift production away from fossil fuel sources are a way of hedging
against this.
Finally, it's worth noting that this latest leak appears in the
context of a wider campaign to associate energy bill increases with
'green taxes' -
a campaign started by the Daily Mail and initially based on figures
sourced to Nigel Lawson's GWPF (and as we have pointed
out previously, some of the figures relied upon by the Mail are
of dubious provenance and tend to collapse on closer
examination.)
As BusinessGreen puts it
"It is apparent that someone in Downing Street is keen to
simultaneously destabilise Chris Huhne's low-carbon agenda and
signal to the Tory faithful that the prime minister is not happy
about green taxes. It is a case of crass political point scoring
over one of the most significant challenges the UK faces."