How much do renewable and energy efficiency policies add to energy bills?
- 23 Oct 2013, 14:45
- Carbon Brief Staff
David Cameron and Ed Miliband spar over energy
bills and green costs.
Three of the 'big six' energy companies - SSE, British
Gas and Npower - have announced
price rises this month. Expect
the other three to follow suit over the next few
Energy companies are blaming a chunk of bill
increases on government measures aimed at supporting energy
efficiency and renewable power: so-called 'green'
So how much do green charges add to energy
bills? It turns out that the power companies and official estimates
Green charges - figures from government and
Ofgem estimated at the end of 2012 that
environmental and social levies added about £107 to
consumer bills - making up eight per cent of an average 2012 annual
for Energy and Climate Change (DECC) set the
figure slightly higher in March 2013. It estimated the levies
accounted for £112, or nine per cent of an average bill.
These figures are the most recent available, but
are also slightly out of date, as they don't account for recent
But the government's climate advisor, the
Committee on Climate Change,
estimates green charges will grow by
about £10 over the next twelve
Green charges - figures from the Big 6 power
Energy companies have highlighted the effect of
environmental and social policies when justifying price rises. The
head of SSE called for a "
national debate" on the green agenda -
to have got one.
The three power companies that have recently
raised prices say green measures cost more than official
Here's are environmental and social costs as a
percentage of the total bill, for each of the power companies that
have announced price rises recently, as well as Ofgem and
The same figures in pounds:
And here are the same figures as part of the total
average bill for each company, alongside Ofgem and DECC
NB: For previous two charts, see the note at the
end of the blog.
The power companies' assessment is that in
2013/14 environmental and social measures will account for 10-12
per cent of bills. That's between £122
and £162 of an average bill, and
between £10 and
£50 higher than DECC's estimate for
What about the recent price rises?
Energy companies say green measures are
partially to blame:
The CCC's estimate is that green tariffs should add
just £10 more this year than last.
So the power companies broadly disagree with the
CCC. They also disagree with each other. SSE suggests green charges
will go up by £15, while British Gas says
they will go up by £50.
Why are the estimates different?
The government accuses energy companies of
over-estimating environmental and social charges, particularly the
costs of its energy efficiency policies.
The Energy Company Obligation - a government
measure requiring energy companies to
subsidise home insulation for low-income
households - will add an additional £40 to bills next
year, according to British Gas.
Company data released by DECC shows ECO
shouldn't be any more expensive to deliver, the government says.
Energy minister Ed Davey
says ECO's costs are in line with those of
the schemes it replaced and "there should be no need
for any increase to consumer bills due to ECO."
The lack of consistency between the energy
companies' estimates could mean they're talking up the costs.
Alternatively, the energy companies could be telling the truth
about how much ECO costs - the figures may differ because some
companies are implementing the scheme more efficiently, and
therefore more cheaply.
DECC's data on ECO
suggests some companies are delivering on
ECO more effectively than others. This could mean that costs rise
for some companies, but not for others.
The government hasn't yet released any data on
how much it thinks government levies will add to bills overall over
the next twelve months.
Given David Cameron's announcement
this morning that the government intends to review the
tariffs, perhaps it isn't going to.
The main point of contention is between the
energy companies - who say that green measures will add up to £50
over the next year - and the Committee on Climate Change, which
says the figure is just £10.
Note: Ofgem have slightly downgraded their
estimate for how much energy the average customer consumes. Ofgem
and DECC's figures are based on Ofgem's old estimate and the power
companies' figures are based on Ofgem's new, lower, estimate for
total consumption. This means the bill assessments
from Ofgem and DECC in the second and third charts aren't directly
comparable with those from the power companies. But the relative
assessments (of percentages - the first chart) aren't affected, as
we did some conversion of figures to make them
The graphs in this post are based on:
Npower statement, SSE statement,
British Gas statement and
breakdown of previous bill.