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£110 billion, the energy bill and the Mail on the Sunday

  • 08 Jan 2013, 16:30
  • Robin Webster

This week's Mail on Sunday claims the UK's coming energy bill could cost the country £110 billion and cause the UK years of chronic impoverishment. The article's headline asks:

"Why is Britain about to pay £110 billion to enter a new Dark Age? A damning indictment of the new 'Green-friendly' energy bill"

The energy bill currently making its way through Parliament aims to reform the energy market, and enable a switch to a low-carbon energy system.

The Mail on Sunday article combines criticism of the bill with criticisms of the government's energy policy more generally. It is authored by climate skeptic journalist David Rose, who recently argued that ' global warming has stopped' in the Mail on Sunday, prompting a critical response from scientists and climate blogs. As you might expect, someone who believes global warming has stopped isn't too keen on the government's planned decarbonisation of the energy sector.

£110 billion - the total burden of the Energy Bill?

The article correctly states that according to the government, subsidies for low carbon energy could rise to a maximum of £7.6 billion a year by 2020 - paid by a levy on consumer bills.

But, it adds:

"Even this underestimates the Bill's full burden, which is closer to £110 billion"

The £110 billion figure is quoted fairly often in discussions about UK energy policy. It's the amount of private sector investment that the Department for Energy and Climate Change (DECC) estimates will be needed to construct new power plants and upgrade the UK's electricity networks over the next eight years. DECC breaks this down into £75 billion for constructing new generation capacity and £35 billion for upgrading the network grid. This total sum will not be paid directly through taxes - or even consumer energy bills. It's an investment the government is seeking from the private sector - which will presumably expect a return.

The MoS incorrectly attributes the entire £110 billion cost to the energy bill. But although a lot of the £110 billion will go to pay for low-carbon infrastructure, that's not the same thing as the measures in the energy bill. The bill contains a specific set of policies that the government argues will bring down the cost of shifting to low-carbon energy sources like renewables and nuclear power by changing the way the energy market works.

And not all the £110 billion can be attributed to the cost of shifting the country's power sector to nuclear and renewables.The UK's aging energy infrastructure needs upgrading anyway, and money will have to be spent on the network grid, for example, whatever happens.

Cost of onshore and offshore wind

On the subject of wind power - the bete noire of climate skeptics - Rose argues:

"The bungs paid to operate offshore wind turbines - the most expensive form of energy ever devised - will rise 16-fold to an annual £4.2 billion. The hated onshore turbines will also get huge new subsidies, at least doubling their number to about 6,500."

The government is aiming to expand offshore wind construction by 18 gigawatts by 2020. Trade body RenewableUK told us that, once all of these offshore wind turbines are generating electricity, onshore wind will indeed receive subsidies (or "bungs", if you prefer) worth £4.2 billion.

It's not clear what the piece means by "huge new subsidies" for onshore wind turbines. Subsidies for onshore wind were cut by ten per cent last year. There doesn't seem to be any suggestion that the new type of subsidies introduced by the energy bill - known as Contracts for Difference - will provide any greater level of support to onshore wind power.

Finally, it's no doubt a rhetorical flourish, but it's an exaggeration to label offshore wind 'the most expensive form of energy ever devised'. Offshore wind is a relatively expensive way of producing electricity compared to fossil fuels and onshore wind, but it is less expensive than other low-carbon technologies like solar, tidal and wave power.

Broadly, the cost of offshore wind is expected to fall, and the government is running a programme to bring down costs over the next few years. Meanwhile, if climate policy if effective at raising the carbon price, the cost of producing electricity using fossil fuel power plants is expected to rise. Of course, if you believe climate change has stopped, that might not be the most compelling argument.

Shale gas instead

Rose suggests the government should invest in shale gas and nuclear power instead of renewables. He says:

"[shale gas] should be used to fuel modern 'combined cycle' power stations whose emissions are only 37 per cent of the coal plants they would replace. All of this could be achieved with no subsidy at all. By such means, America, where fracking began on a large scale in 2003, has reduced its gas price by two-thirds and cut its CO2 emissions to the levels of 20 years ago."

Burning gas is less carbon intensive than coal power - the conventional wisdom is that burning natural gas produces approximately half the emissions of burning coal.

The full story on shale gas's impact on the climate is still being worked out, and so-called 'fugitive emissions' produced during the extraction of the gas are likely to push its carbon footprint up. But at the moment, the rough consensus is that burning shale gas instead of coal reduces emissions.

We couldn't find a source saying that conventional gas power stations only produce 37 per cent of the emission of those fuelled by coal - but if you know where this comes from, please do put it in the comments.

It may be true that an expansion of shale gas could be achieved "with no subsidy at all". But it's worth pointing out that George Osborne recently announced that the government will consult on a " generous tax regime" for the nascent industry - in other words, future tax breaks.

Finally, the article advocates pursuing innovative new forms of nuclear power - including nuclear fusion. But we're left wondering. If you think that global warming has stopped, even though carbon emissions into the atmosphere continue, why argue for changing anything at all?

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