Electricity prices to rise 25% because of green measures say CCC - impact on bills less clear cut

  • 15 Dec 2011, 14:34
  • Robin Webster

Household energy bills are on the news agenda today, as the Climate Change Committee release a short report into the impact meeting the UK's carbon budgets will have on household energy bills. In response, the anti-'green stealth tax' campaign have had to do some quite inventive reporting - apparently cherry-picking figures that apply to less than 1 in 10 UK households.

The CCC press release is titled: "Household energy bill increases caused primarily by rising cost of gas, not environmental policies", and so they are in agreement with recent analysis from both energy regulator Ofgem and DECC that bill increases have more to do with gas price rises than green policies.

The CCC say that between 2006 and 2010, green policies added about £75 to bills, while rising gas prices contributed around £290. In the future, the Committee estimate that green measures will add a further £110 to bills by 2020, and that the rise in the price of gas will again be more significant, adding £175.

In total, by 2020, the CCC predict green measures will add around £190 to an average bill (£130 from measures to support greener power, £60 to support energy efficiency measures in homes), and will make up 16% of the total bill of £1250.

They conclude:

"The Committee's finding therefore disprove often repeated claims that recent bill increases are due to environmental policy costs, and that major investments in low-carbon power capacity will drive dramatic bill increases over the next decade"

The Mail story focuses on electricity bills rather than energy bills as a whole, and is headed:

"Electricity bills to rocket by 25% because of 'green' targets, says Government"

However, the Climate Change Committee don't predict that electricity bills will rise by 25%, either overall or as a result of green policies, and they aren't the Government - they are a separate advisory body, headed by Lord Turner.

The 25% comes from page 17 of the CCC report, and is detailed more precisely in the article:

"In total, 'green' measures will add 23.8 percent to the price of electricity"

The CCC say:

We project an electricity price of 17.8 p/kWh in 2020; this is a 5.2 p/kWh (40%) increase on 2010 levels. Of the increase, 1.5 p/kWh is due to the increasing wholesale energy (i.e. gas) prices, 0.5 p/kWh is due to increasing transmission and distribution costs, and 3.0 p/kWh is due to increasing low-carbon policy costs

If current levels are 12.6 p/kWh, 3 p/kWh is roughly a 25% increase in electricity price.

The Mail also notes:

The CCC's report suggests that people whose homes are heated by electricity will see their average bills rise from about £1,500 to £2,100 in 2020 … Around £400 of the projected increase is directly related to 'low-carbon measures'.

Initially, it looked to us like this is where the 25% figure came from, as £400 of £1600 is about 23%, and this is discussing impact on electricity bills, rather than prices. This figure is contained in an annex to the main report titled "Assessment of non-typical households", which discusses impacts on those who use electric heating.

The Mail notes that this is for households which use electricity only. So a 25% impact on electricity bills is only predicted in the CCC's research for one in ten households.

It's worth noting that the CCC have engaged in a bit of spin of their own. By focusing on the fact that green measures will add an additional £110 to bills by 2020, the CCC make it less than clear that the total amount, including the impact of measures which are already in place now, will be £190. And you wouldn't know this from reading the Telegraph's headline:  Green policies to add £110 to energy bills.

As a footnote, perhaps the most interesting bit of the report is where the Committee take a detailed look at the likely impact of energy efficiency policies on bills. The Government predict that energy efficiency measures will reduce household consumption, and mean that in 2020 bills will be lower compared to what they would be without government intervention.

Such predictions have been met with widespread scepticism from all sides of the political spectrum. The CCC's report highlights the different opportunities for reducing electricity consumption (particularly of more efficient products) and suggests that overall, if they are implemented, energy bills in 2020 will be broadly at 2010 levels.

They caveat this with the statement that "However, the Committee stresses the need for new policies with strengthened incentives in order to encourage energy efficiency improvement."

Updated 20th December 2012 following explanation of how the figures in the article were calculated from the Mail group.

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