I was doing an interview for ITV’s Tonight programme a couple of weeks ago, the show went out last night. I’ve not seen it yet, and don’t know what parts made it to the final cut, but it was a good discussion and it left me feeling that I should try and pull together the main elements of that conversation – they seemed so relevant and current.
The central thrust of the questioning was about the cost of green energy, or green crap as Cameron infamously has it – its impact on our energy bills and whether it’s the right thing to do as energy bills continually rise and become more unaffordable. It’s essentially the narrative of a number of politicians and media outlets of the past months and years – and it’s based on myth and propaganda more than fact.
Let’s start with Onshore wind (often the villain of the piece) – how much does it cost each household in Britain each year, to support it? Less than a tenner¹.
All green energy sources are costing us about £30 per household per year, for the Renewables Obligation (which supports large scale green energy projects) and another £7 for the Feed In Tariff which supports smaller stuff, typically household scale projects. £37 in total on our energy bills to support green energy².
That needs viewing in the context of the total burden on our energy bills – which Cameron calls Green Crap. That’s about £112³. There’s a breakdown below, but essentially over half of the costs involved are social measures, not green energy support. Cameron’s falsehood is twofold: to label these as green costs (when they are mostly social), and to overlook that most of them were imposed by his own government.
So £37 out of £112 is the actual amount that green energy adds to our bills, each year.
Is that £37 or even the £112 the root cause of increasingly unaffordable energy bills?
Consider this – over the last eight years the typical household energy bill has doubled, from £600 a year to £1200. Of that £600 increase in our energy bills – £37 comes from green energy support (as above), the other £563 has nothing to do with Renewable Energy at all. It’s largely driven by the rising price of fossil fuels.
In 2011 alone the rising cost of gas on world markets added £120 to each of our energy bills⁴.
That’s the real cause of spiralling bills – steadily increasing fossil fuel prices.
Cutting back green energy support is counterproductive given that background, I’d go so far as to say it’s economic madness.
And it’s not like fossil fuels are becoming more expensive to extract, the price rises are more a function of the ‘free market’ – increasing demand, supply control, price speculation and commodity trading. Maybe we should label this £563 – ‘Free market crap’.
You don’t have to be an economist to know that it’s better to spend our money building green energy generating machines here in Britain – rather than blow it in the fossil fuel markets.
And it’s no coincidence that Ecotricity has had stable energy prices for over 22 months now (and set to continue) – it’s because we have the highest proportion of home grown green energy in our supply mix, and smallest exposure to fossil prices. It’s a model for the country.
Coming back to that £112 on our bills – it’s 9% of current bills and it’s not helpful, but not the root cause – and I don’t think it belongs there. The initiatives it funds should come from general taxation – central funding. It’s regressive to have measures aimed at helping the fuel poor, funded by fuel bills, which hit the fuel poor hardest. And egregious to have measures that support the relatively well off (solar panels on roof tops) also paid for by the fuel poor in their bills.
Energy bills are not means-tested, meaning the poor and fuel poor are paying just as much for schemes designed to help them as the more well off people in Britain. Taxation is means-tested, so the costs of meeting these policy measures would be distributed more fairly – according to ability to pay.
Energy bills should be just for energy. All the other levies and costs should be funded from central taxation, as is more normally the case with other industries.
It’s interesting to consider what else we subsidise as tax payers and from central funding rather than on bills of any kind– the media makes great play of the support given to green energy and onshore wind, but we hear little of other ‘subsidies’.
We did a little number crunching, looking at the annual cost per household of various taxes and subsidies (I’m not sure there’s always a real difference) this is what we came up with –
Landfill tax – £45
Nuclear Decommissioning, the old fleet not the new ones – £85
Rail subsidies – £85
Subsidies for Farmers – £118
Fossil Fuel support – yes it is subsidised – £158
All of these are rather higher than the cost of Onshore wind.
And none of these costs appear on bills of any kind, they are just costs that we the public pick up. Why should green energy and energy efficiency (social) measures be any different? Well one answer is that it allows them to be stigmatised.
Last thought from me.
Sunday October the 19th was a very big day. Four nuclear power stations were offline, some unexpectedly – and Didcot (gas powered) burst into flames. Nine million homes worth of electricity disappeared from the grid that day. Did anyone notice? Not really, because Britain’s windmills kept turning and on that day provided up to 25% of the electricity needs of our country.
I take two things from that. We can depend on wind energy rather more than media and government commentators would have us believe. And the opposite is true for nuclear and fossil fuels.
Nukes breakdown all the time of course, we’re used to that but Didcot was not an exceptional event either – it’s the third fire at a fossil fuelled power station this year.
We’ve placed an ad in the Guardian today, just to flag this up.
¹ The cost of the Renewables Obligation for wind overall in 2012/13 (latest available figures) was £1,256 million (£557m for onshore + £699m for offshore), so 44% of the RO was for onshore wind, 56% of the RO went to offshore wind.
Add the cost of the Feed in Tariff for onshore wind which is “less than £1 per household per year” in 2013 according to Michael Fallon when he was Energy Minister. So the cost of onshore wind RO + FiT is less than £10 per UK household per year in 2013, or less than 20p a week, or less than 3p a day.
² According to former Energy Minister Michael Fallon, the total cost of the RO for wind overall in 2012/13 was £1,256 million (£557m for onshore + £699m for offshore) or £1.25 billion. He stated that the RO accounts for 2% of the average annual domestic fuel bill (£30)
In a written parliamentary answer published on 11th March 2014, Fallon stated that “on average, around 1% (£7) of the household energy bill in 2013 went towards supporting small-scale installations through feed-in tariffs (FITs). Wind installations are estimated to make up a small proportion of this cost, less than £1 in 2013”.
³ According to the Department for Energy and Climate Change (DECC) March 2013