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Anti-wind lobby group criticises DECC's projections on energy bills - is it right?

  • 22 May 2012, 16:00
  • Robin Webster

A new report, which criticises the government's predictions on the cost of renewable electricity, was featured in the Sunday Telegraph this week.

Produced by oddly named anti-wind lobbyists the Renewable Energy Foundation, it takes issue with projections the Department of Energy and Climate Change (DECC) produced last November on the estimated future impacts of green policies on energy prices and bills.

Rising energy prices look to be here to stay. Nevertheless, DECC's key prediction in November was that green policy measures will lead to a net reduction in energy bills of £94 in 2020 - net, because that's compared to what bills would have been otherwise. Some policies will cost consumers, DECC argue, but others will reduce energy use and cut bills.

REF's report takes a less cheery interpretation of DECC's numbers. As such, it isn't really new research, more a reinterpretation of already-existing government figures. The main thing REF points out is that the 'average net reduction' figure quoted above doesn't give the full picture of how bills will change.

This is because many of the policy measures DECC believes will reduce bills only apply to a limited number of households. These include those with lower incomes, for example, those who are in fuel poverty. They also apply to households that are already benefiting from policies like feed-in-tariffs.

REF highlights that according to the DECC figures, only 35 per cent of households will see a net reduction in their energy bills. In contrast, 65 per cent will see a net increase. This argument has been made before - REF's conclusions tally more or less with those of free market think tank Policy  Exchange and this piece in the Guardian - but it is a good point that unpacks the averaged stats, and bears repeating.

The REF report also devotes considerable space to criticising the government's predictions on savings from energy efficiency measures. One area it looks at in particular are the savings driven by EU Products Policy, which is the label given to European legislation that sets legally binding minimum energy efficiency standards for electrical equipment.

DECC anticipates that EU Products Policy will cut £158 from the average domestic energy bill by 2020 - and this makes up more than two fifths of the amount it thinks energy efficiency measures will save an average household.

REF is sceptical about whether the savings will be delivered. In particular, it points out that the legislation driving one third of the savings in question - under the second 'tranche' of the legislation - has not yet been negotiated by member states. Given the sometimes tortuous rate of negotiations in Brussels, this could create a genuine uncertainty over a portion of DECC's predictions.

Finally, the REF report accuses DECC of spinning what's going to happen, and being unduly optimistic. Given that predicting the future on these issues can be a somewhat murky enterprise, this is perhaps hardly surprising.

But of course, REF is not immune to a bit of spinning itself - its press release says the report

"...shows that the UK's energy and climate policies will be responsible for major increases in the retail price of gas and electricity in 2020, with percentage increases for electricity ranging from +27% for domestic households to +34% for medium-sized businesses and, for gas, +7% and +11% respectively."

But REF didn't calculate this - these numbers are actually DECC's own estimations for gas and electricity prices (see tables p.26 and 3.38).

In the Telegraph, this is phrased as:

"REF [...] estimates that electricity prices on domestic bills will rise by 27 per cent by 2020 and by 34 per cent on bills for medium-sized companies. Gas prices will rise by seven per cent and 11 per cent respectively."

As we have pointed out before, there is a recurring confusion in the press between 'energy prices' - the retail price of electricity - and 'energy bills' - which are a product of prices and how much a customer uses. If, as the government hopes, people start using less energy, prices can go up faster than bills.

Deliberately conflating prices and bills can be a good way to inflate numbers and get a more sensational headline. The Telegraph's use of the phrase "electricity prices on domestic bills" is technically accurate, but could easily mislead the reader into assuming that electricity and gas bills will go up by those amounts. (We had to read it twice to see what it meant.)

In order for these numbers to apply to energy bills, rather than energy prices, energy efficiency policies would have to have no impact at all on bills. And while it seems reasonable to question how effective such measures are going to be, saying they'll have no effect at all seems like a stretch.

Finally, a question. Can you dismiss a report by looking at who produced it and funded it? Blog Left Foot Forward noted yesterday that gas company Calor Gas Ltd   funded REF's report. Calor Gas is a subsidiary of SHV Gas Group, a global gas company based in the Netherlands, and which clearly has an interest in encouraging the UK government to "dash for gas" rather than renewables, or nuclear.

Furthermore, the Renewable Energy Forum, which wrote the report, is the consultancy arm of the Renewable Energy Foundation (REF). REF has said that any profit the Renewable Energy Forum generates finances its work. While REF maintains that it supports renewable energy, it is generally viewed as an anti-wind lobbying organisation and it certainly seems to confine itself to expressing hostility to wind power.

The Telegraph doesn't mention any of this in its article, which is a shame. Whilst we believe that you shouldn't use the source or funder of a report to dismiss it out of hand, it's usually a pretty good indicator for what the report is going to say. In a highly contentious and polarised energy debate, unfortunately that just seems to be the name of the game.

The framing of the REF report is: "We can't predict what's going to happen, so it isn't going to work". A green organisation might use the same data to say: "We can't predict what's going to happen, so the government needs to do even more to make sure it works". Given these different messages coming from the same numbers, it's always useful to know who's saying them.

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