It’s been a crazy few weeks in the Energy sector, nobody could have missed that.
The issue of rising energy bills comes up at the start of most winters it seems – but it did so with a real bang this year. Ed Miliband kicked things off with his pledge to freeze bills, the Big Six joined in by putting them up – and threatening blackouts if Ed tries it – and David Cameron rounded things off with his own contribution – which was to point the finger at ‘Green levies’ and pledge to roll them back.
Good stuff as the panto season approaches… 🙂 Or is it more than that?
The Green levies that Cameron is targeting, 60% of which his government imposed, have had a lot of media exposure – from the usual suspects, following the usual narrative; green energy is expensive, ineffective and is at the root of rising energy bills (I think that sums it up fairly). Oh no – I missed out the Climate Change isn’t real anyway bit…
But calling these costs green isn’t right, not quite honest. The biggest among them (at £47) is a scheme to put energy efficiency measures into lower income households – it’s a social measure known by it’s acronym ECO (Energy Company Obligation), which no doubt aids confusion.
Add that to the £11 cost of cheaper energy for older people (another social measure – called the Warm Home Discount) and over half the total cost (£58 out of £112) is due to social measures – not green ones.
I’ve set out a breakdown of these additions to our energy bills at the foot of this blog.
In my opinion it’s deceitful to describe them collectively as Green levies. With the inference being that it’s the cost of supporting green energy – which by the way is £30 for the Renewables Obligation (which supports large scale green energy) out of that £112 total.
And another £7 for the Feed In Tariff (FIT) which supports smaller scale, typically household green energy schemes – not a great way to spend money if you look at the cost of each unit of green energy generated – but that’s another story.
I’ve some sympathy for the argument, made by the Big Six, that energy bills are being used to pay for things that should be paid for from general taxation – like these social obligations. And funding these schemes through energy bills is anyway a regressive way to do it; as in the process everyone’s energy bills go up, including those people the schemes are designed to help. I mean £58 a year is a lot of money to charge someone struggling to pay an energy bill.
Much of this is known already.
But in the middle of all of this the government made another announcement, which went largely, if not completely unnoticed, certainly unscrutinised (well as far as I’ve seen).
They announced the level of support that will be paid to new nuclear generators.
It took the shape of the long awaited ‘strike price’ – the amount that will be paid for the electricity they generate, under the Contract For Difference (CFD) mechanism.
The CFD is designed to support what the government defines as low carbon generation sources – renewables and nuclear. It’s a support mechanism, a subsidy to some – and it will be paid by all of us on our energy bills.
It’s a new Green levy in Cameron’s own language.
It was perhaps a good week to bury bad news, but how this one escaped attention is hard to understand – it was absolutely the issue of the day. It is a very big new Green levy – in the week Cameron told us he would roll back Green levies…
Just how big is this new Green Levy? If new nuclear power stations are built to the full planned capacity – the impact on existing Green Levies on household energy bills, will be to double them! This new support for nuclear power will add over £110 each year to all of our energy bills. And do so for 35 years.
Clearly Doublethink is at work here.
Green energy measures are, we are told (by the government and much of the media), expensive and at the root of rising bills. Despite the evidence of the governments own Climate Change Committee to the contrary. Meanwhile nuclear support costing as much as all the other green levies combined, gets announced but goes unnoticed – in the debate on rising energy bills and Green levies. The government tells us one thing and does another – pretty much in the same week, the media assists.
The government also committed tax payers to pick up an undefined share of the clean up cost of these new nukes, which will be a sizeable additional cost; given that current estimates to clean up those nukes we already have are around £100 Billion. And we (tax payers) will also provide accident insurance, which surely isn’t coming cheap on the back of Fukushima. These further new Green levies won’t appear on our energy bills, they will come from general taxation. More doublethink, or just double standards?
And then there’s EDF.
Last week they announced a headline grabbing 3.9% price rise for their energy – just half of the typical Big 6 rate, making them look like good guys, but with a catch – it’s contingent on the government removing the ECO scheme from energy bills. EDF will increase their prices again if the government does not remove this, they made that clear.
EDF thus took a stance against these additional costs on our energy bills, Cameron’s so called Green levies – or at least that’s how they might like it to appear.
Meanwhile, as above, something else just happened, in parallel, apparently contradictory, but apparently not.
This is the EDF that intends to build a new nuclear power station at Hinkley, and under the governments CFD scheme, something EDF have been negotiating with our government for a very long time – they will receive a lot of new support, through our energy bills – through those same Green levies.
Take a quick look at the numbers – EDF are wagging their finger at the £47 per household per year that ECO costs – this covers the costs all the Big 6 incur under the scheme, between them.
Meanwhile Hinkley alone (and just the first phase of it) will add £13 per year to everyone’s energy bill – just to pay EDF. Clean up costs and insurance against meltdowns will be on top of that.
A very slick move by our French friends.
Vive la Contract for Difference. And down with Green levies.
Doublethink is alive and well.
1. Breakdown of ‘Green Taxes’
|Energy Companies Obligation (£47)||Energy efficiency measures for low income households.|
|Renewables Obligation (£30)||Requirement on energy companies to source a proportion of their energy from renewables.|
|Warm Home Discount (£11)||Helping low income households.|
|EU Emissions Trading System (£8)||Allows companies to trade emissions allowances under a greenhouse emissions cap.|
|Feed-in-Tariffs (£7)||Provides income for small-scale electricity generation, including domestic.|
|Carbon Price Floor (£5)||Tax on fossil fuel emissions via electricity generation|
|Smart Meters (£3)||To provide more reliable billing information.|
2. Calculation to demonstrate pass on cost to consumer energy bills from nuclear strike price
|90||% load factor|
|216,169,560||MWh per year|
|216,169,560,000||kWh per year|
|50||% of strike price is support|
|£46.25||support from strike price per MWh|
|£9,997,842,150||support per year for New Nuclear from CfD|
|30||% of UK electricity is consumed by domestic market|
|£2,999,352,645||support from Domestic portion of CfD|
|£111.09||per Household per year|