Something of a brouhaha is developing over the leaked briefing to David Cameron, claiming that UK energy bills will rise 30% (roughly £300) by 2020. The Telegraph, who reported the leak, say,
Mr Cameron is said to be “very worried” about the figures in the paper, written by Ben Moxham, his senior energy adviser who was recently brought in to beef up the Prime Minister’s policy unit.
The private note, seen by The Daily Telegraph, is titled “Impact of our energy and climate policies on consumer energy bills”. It was sent to Mr Cameron and offers a blunt assessment of how Coalition energy plans, in particular a series of green policies, will affect householders.
Well at least somebody is pointing it out.
Apologists for rising energy prices and fuel poverty — the people who would be otherwise calling for more expensive energy — have been quick to respond.
The Carbon Brief — which claims to offer advice on climate matters, but is in fact merely a blog for anonymised Greenpeace and FoE activists — have tried to pour water over the claim…
DECC base their analysis of future energy bills on the assumption that energy efficiency measures (for example increased home insulation) will reduce household consumption of energy – so while prices go up energy bills may remain steady or even go down. While DECC predict that climate change and energy policies will cause gas prices to go up by 18% and electricity prices by 33% by 2020, they estimate (as of July 2010) that because of reductions in energy use
This is spin like no other I’ve ever seen: it’s not a price rise because we expect people to consume less, for the same price. Shame on the Carbon Brief. They continue, quoting from a DECC source,
“Sustained higher prices for fossil fuels reduce the cost of some energy and climate change policies, lowering the cost passed onto consumer bills. For example, at an oil price of around $150 per barrel in 2020 and gas price of around 120 pence per therm, climate change and energy policies would have the effect of reducing bills in 2020 by around 5% compared to a bill excluding these policies.”
In other words, fossil fuel price increases and volatility will increase energy bills, and measures which reduce consumption and shift production away from fossil fuel sources are a way of hedging against this.
In other words, in fact, the government have gambled on fossil fuel prices increasing, as they have in recent years. But what if fossil fuel prices fell? What if, for example, improvements in drilling technology produced an abundance of cheap gas, and oil — perhaps from shale deposits, and deep water exploration, and methane clathrates? If we can say that increasing costs of fossil fuels ‘reduces the cost’ of renewables, then we can say that decreasing costs of fossil fuels increases the cost of renewables. The rest of the world may well be paying a fraction of the price for conventional energy in 2020, while the UK is stuck with its commitments to subsidising ‘renewables’.
Damian Carrington in the Guardian gets his knickers in a twist to almost the extent the Carbon Briefs are.
Soaring gas and electricity bills are potent politics, but a leaked analysis for David Cameron does not support Canute-like railing against green policies.
Canute, of course, railed against the waves. The implication, then, seems to be that green policies are as inevitable as the tide. It is in unguarded moments such as these that we see what the green mindset is really made of.
Let’s take that head on. A source in Westminster tells me that Moxham was clearly referring to electricity alone when he suggested a 30% rise by 2020, meaning the rise would be about £135, but that the sentence was sloppily written. The source says Moxham’s analysis is “very sensible” and not vastly different to that at Chris Huhne’s department of energy and climate change. The official response from Decc is the same: “Reforms will not add £300 to bills.”
It’s so incredibly stupid, because, as an excuse, it forgets that many households — mine for instance — are not connected to the gas supply. What Carrington is involved in here is defending the environmental policy-makers, rather than investigating — like a proper journalist — the material problems that such blind commitments to energy policies are likely to cause. That would be one thing, if it were the opposition party’s policies he was defending. But as a defence of government policy, the ‘liberal’, ‘progressive’, and warm and fluffy Guardian journalist makes himself a tool of the state.
And there’s every reason to think the state have massively underestimated the problem. As discussed here recently, the Government and the DECC did not anticipate a doubling of the levels of ‘fuel poverty’ between 2004-9. 5.5 million — more than a fifth of all UK households — now have problems finding money to pay their bills. The government’s plans to insulate homes to protect them from rising energy prices is already a failure.
But there’s every reason to believe the new advice to Cameron.
According to Chris Huhne at the end of 2020…
More than £110 billion of investment is needed in new power stations and grid upgrades over the next decade, that’s double the rate of the last ten years. Put simply, the current market is not fit to deliver this.
Assuming that the domestic user ends up paying for just half of the UK’s energy demand, £55 billion is paid by 26 million homes, which means they each have an extra bill of £2,115.38 to 2020, or £215.54 per year for the whole extra investment.
Furthermore, the 7% of electricity that was produced in the UK from renewable sources cost $1 billion in subsidies. The target for 2020 is to produce 30% from renewable sources, or 4.3 times the 2010 amount. We can assume, then, that £4.3 billion in subsidies will be needed in 2020, or £82.42 per home — an increase of 2010 levels of £63.19.
The total is £278.73. I’m sure there are some problems with the way of arriving as this figure. But I’m equally sure this isn’t the half of it. There are opportunity costs to consider, and the wider social consequences of making energy more expensive — the ‘externalities’, I guess we should call them — such as unemployment, hypothermia in the elderly and other diseases; and the further cost of creating or subsidising the measures to combat these social effects.
Wouldn’t it be better to spend that £110 billion — or £300 each for a few years — on real energy R&D: ways to produce more of it, more cheaply? The idea of abundance and the freedom it would create are anathema to the government’s mood, however. Yet nobody has ever voted for higher energy bills. And nobody has ever been asked. Shouldn’t that worry the Prime Minister and the Department for Energy and Climate Change more than anything else?