Green policies will put bills up £280, but bring them down by £450, says DECC
- 27 Mar 2013, 13:00
- Robin Webster
New analysis from DECC says that 'green' policies will put
consumer energy bills up - and drive them down again. Despite
rising energy costs, consumers will be net winners, the government
argues, suggesting its policies will leave consumer bills 11
per cent lower in 2020 than they would have been in a 'world
estimates that measures designed to increase uptake of
renewable power, nuclear and energy efficiency will add £286 to
consumer energy bills by 2020. But the analysis also concludes that
energy efficiency policies will reduce household consumption of
energy, bring bills down again by an average £452 per
The figures in today's report differ very little from an earlier
analysis released by the government in November
2011, and have been widely reported. We will see a "£286 green
tax on energy bills", according to the
front page of the Daily Mail today, while the BBC says the
government's energy policies will "reduce bill
rises". The Telegraph cite the Labour shadow-DECC team, who
accuse the government of an "
underhand" attempt to mask the impact of their policies.
But what does the report say, in detail?
1. The impact of climate and energy policies on consumer
energy bills now, in 2013
The government figures show that energy and climate change
policies currently add £112, or nine per cent, to the average
household consumer energy bill.
The average bill is broken down in this chart:
The document also breaks down the "costs of energy and climate
change policies" further: Breakdown of the cost of
government climate and energy policies. The specific figures are:
Energy Company Obligation (ECO) - £47; Renewables Obligation - £30,
EU Emissions Trading Scheme (ETS) - £8, Carbon Price Floor (CPF) -
£5, Warm Homes Discount - £11, Feed in Tariffs - £7, Smart Meters
and Better Billing - £3
Energy minister Ed Davey
emphasises that despite the
media focus on subsidies for renewable power, more than half of
the current amount goes to pay for energy efficiency policies.
About £18 of the cost is currently for wind power - £9 for onshore
wind and £9 for offshore wind.
2. Energy bills are going to go up whatever the government
Bills are going to go up whatever happens, DECC conclude, as gas
gets more expensive, and we pay to maintain the electricity
A spokesperson for DECC told Carbon Brief that wholesale energy
costs are expected to add about another £100 to consumer energy
bills between now and 2020, and rising costs of the electricity
network another £50. In total, DECC says that without any
government policies targeting energy bills, bills in 2020 would be
£177 - or 13 per cent - higher.
Some network costs are to maintain the grid and replace ageing
infrastructure. Some will be for upgrading the grid in order to
connect new generating capacity - particularly wind farms and
nuclear plants, and DECC doesn't disaggregate these costs.
3. The impact of government's policies on domestic bills
DECC says that by 2020, relative to now, the average bill will
rise to £1,412 - 7.5 per cent above current levels.
But the analysis also suggests that energy efficiency policies
will mean consumers use less energy, and this will mean that this
bill will be lower than it would otherwise be - about 11 per cent
lower in 2020.
This argument is laid out in this infographic, which helpfully
capitalises 'LOWER BY £166'.
The government made a similar
rather clunky prediction in 2011. Back then it suggested that
its policies could lower bills by seven per cent, not eleven. The
analysis now takes into account the impact of new,
more efficient boilers, and produces a more optimistic
It's worth noting that this is an averaged projection - although
DECC argues that nearly all households will experience some
4. Will energy efficiency policies deliver?
DECC's argument hinges on assuming that energy efficiency
policies are effective. There are two main measures that need to
Products policy: About a third of DECC's
predicted savings come from
EU Products Policy, which sets energy efficiency standards for
electrical appliances. This means that as consumers replace their
washing machines, televisions and lighting, the new models use less
The limitation here is obviously that the savings don't kick in
while consumer are using old appliances. DECC says that it is using
standard figures for the rate at which consumers tend to replace
electronics. The Telegraph
isn't convinced - arguing that
"...millions of households, especially
older people, will not necessarily be replacing their appliances
within the next seven years."
Household energy efficiency measures and the Green
Deal: Another 30 per cent of the savings come from
government policies aimed at encouraging householders to improve
the efficiency of energy use in the homes - for example through
loft or cavity wall insulation. These include the older government
policies and the government's new programme the
Ed Davey told Carbon Brief yesterday that the government's
predictions on the savings its policy measures will deliver are
"conservative" and "on the cautious side".
But the Green Deal has been heavily
criticised as over-expensive and over-complex. At the very
least, it's a very new policy, and questions hang over what kinds
of energy savings it will actually deliver.
DECC's argument is that although bills are going to go up
regardless, we'll be better off with their policies than without
them. The various parts of their projections are somewhat
confusing, but essentially it comes down to quite a simple question
- can the government's energy efficiency policies deliver?
the Times is skeptical, and gets to the key issue - can the
government deliver the energy efficiency measures it needs to in
order to see a net reduction in energy bills? The paper quotes
Andrew Warren of the Association for the Conservation of Energy,
"Of course these savings are do-able.
But are we on target? It's not desperately clear that we are. The
calculations assume that new products are purchased and that people
do not stagger on with their old boiler. It's quite difficult to
see what the stimulus will be to deliver these savings."
Energy is likely to get more expensive in the future whatever
happens. But if the government can't encourage us to reduce the
amount of energy we use, there won't be much to limit the effect of
future price hikes.