Stable energy prices and no energy efficiency: A closer look at Npower’s energy bill estimates
- 16 Jul 2013, 14:35
- Mat Hope
Energy bills are going to rise, and it's mainly the
government's fault - that was the core message of
a number of
articles covering a new
report from energy company Npower this morning.
Npower claims household's will paying £156 more
in 2020 for gas and electricity than the government predicts. The
main reason, it says, is government policies designed to promote a
transition to a low carbon economy. But the government has rejected
Npower's projections, with climate change minister Greg Barker
maintaining the policies will save households money in the long
So how do the predictions stand up? How do they relate to other
estimates of how your energy bill is going to change? And most
importantly, what are the assumptions?
Energy bills in 2020
Npower says an average household will be paying £1,487 for
energy in 2020. That's £156 more than the government's £1,331
Why the difference? The table below shows how Npower and the
government expect bills to be broken down in 2020:
While the categories in Npower's report don't directly match the
government's, there are two areas where they obviously disagree:
The impact of government policies, and the future cost of fuel.
Energy policy impact
The amount of money households are expected to save due to
government policies makes up the biggest difference between the two
projections. Npower says the government's predictions for how much
people will save from energy efficiency are based on some
"heroic"assumptions. Npower takes the opposite approach,
assuming that household energy demand will be exactly the same in
2020 as it is today.
Npower says government policies will account for £329 of a
household's bill in 2020 - 78 per cent more then they account for
today. The government, in contrast, says its policies will save
households £166 overall by 2020.
The Department of Energy and Climate Change (DECC) expects
households to save through energy
efficiency measures such as wall insulation and installing more
efficient boilers. But many of those measures are promoted through
the Green Deal, which has so far been
slow to catch-on.
DECC also expects savings because of the EU products policy,
which encourages energy efficiency. This should mean that as
consumers replace their washing machines, televisions and lighting,
the new models use less energy. But the savings don't kick in while
consumer are using old appliances. DECC says it uses standard
figures for the rate at which consumers tend to replace
electronics, but not everyone is
While DECC may be optimistic on some measures, Npower might be
pessimistic on others. A footnote on page 5 of Npower's report
suggests it uses energy regulator
OFGEM's household gas and electricity consumption estimates for
2013 in every year of its projection. That would mean energy demand
doesn't ever reduce, implying the government's energy efficiency
schemes have no affect at all.
The table below shows how Npower and the DECC expects policies
to effect bills:
OFGEM has previously said it expects the
rising cost of gas to be the main driver of energy bill
increases. But Npower believes fuel costs will remain stable.
Npower expects gas prices to be pretty similar in 2020. See
their projections here:
The government disagrees. It predicts the cost
of gas will increase by 5 per cent from today's levels to
Npower predicts fuel costs will eventually fall as more
renewables come online, reducing the the UK's reliance on volatile
coal and gas markets.
This would largely rely on the government successfully
incentivising wind, solar and hydropower development - as Npower
acknowledges. While Npower thinks the government's energy
efficiency policies won't work, it seems to think its renewables
Not Npower's fault
Appearing on the BBC's Today programme this morning, Npower's
chief executive, Paul Massara called for a more mature conversation
about future energy costs. The main thrust of his argument is that
rising costs will largely be beyond suppliers' control, despite
public may think.
Npower's projections places blame for the cost
increase at the government's feet, based on an assumption that
energy efficiency policies won't deliver any reduction in
demand. This is not the first time the argument
has been made, and the general view seems to be that it has some
merit. Slow take-up of the Green Deal programme will only
reinforce that view.
But coming from one of the big six power companies, this report
may be an effort to shift blame for price hikes away from
energy company profits and back onto the government.