Dances With Energy Bills

After the recent notorious Panorama programme on energy prices, and yesterday evening’s debate on renewable energy and the costs of green energy policy, in the House of Commons, a number of people have commented that Members of Parliament and Ministers of the UK Government appear to know very few facts – and those they can remember they seem to quote in the wrong context.

This state of affairs is disgraceful, and allows mendacious narratives to persist in the mainstream media.

RenewableUK contacted me and asked me to embed a YouTube offering some corrective information. I was very pleased to do so. I can assure my readers that I have not and will not be paid for doing so.

The key problem is not the cost to energy bill payers from direct subsidies such as the solar photovoltaic feed in tariff. The contribution from this is minor. The largest effect on energy bills is likely to come from two sources – the Energy Company Obligation and the plans for Carbon Pricing and other measures in the Electricity Market Reform.

The Energy Company Obligation, or ECO, is essentially a bailout for the big energy supply companies. They are being told to make sure that their customers can buy not only energy, but energy conservation services. These companies will end up selling less energy overall, and may suffer profit penalties. They have demanded compensation for this loss of earnings. After all, they have shareholders, and pension funds who are shareholders, and nobody should be deprived of their dividends, should they ? So the energy companies will be permitted to charge their customers extra to fund the ECO

“The ECO is in effect a levy on everybody’s energy bills. There is an amount collected by energy suppliers and then used to fund energy efficiency programmes. Current programmes such as Warm Front are being wound down and will be replaced by Green Deal Finance and the new ECO. The Government’s intention is that ECO should be used to supplement Green Deal Finance to pay for energy efficiency improvements in hard to treat properties (e.g. where there is no cavity wall insulation) and/or for those in fuel poverty.”

http://www.decc.gov.uk/assets/decc/11/consultation/green-deal/3607-green-deal-energy-company-ob-cons.pdf
http://www.decc.gov.uk/assets/decc/what%20we%20do/supporting%20consumers/green_deal/1732-extra-help-where-it-is-needed-a-new-energy-compan.pdf
http://www.consumerfocus.org.uk/files/2010/12/Green-Deal-ECO-v1.pdf
http://www.businessgreen.com/bg/news/2127605/treasury-confirms-gbp200m-introductory-green-deal-offer

The second major factor in rising energy bills in future will come from carbon pricing and other energy market manipulation. There have been a number of measures considered in the Electricity Market Reform, but the key contenders include a “carbon floor price” (making sure that carbon charges have a minimum price below which they cannot fall), “contracts for difference” (where electricity sale contracts would be written to guarantee supply companies a fixed profit) and “capacity payments” (where power stations will be paid to remain on standby as backup to low carbon alternatives). A carbon price would benefit nuclear power generators, as nuclear power is considered low carbon. It won’t create an incentive to build new nuclear power stations, however, whereas the promise of guaranteed profits from the “contracts for difference” arrangement could persuade EdF and other nuclear power construction companies to invest.

The Electricity Market Reform and the Energy Company Obligation, considered in addition to the European Union Emissions Trading Scheme, could cost each household energy bill payer something of the order of £170.00 per year :-

This is far, far larger than the feed-in tariff budget.

Personally, I think carbon pricing is a dangerous waste of time, and will not and cannot displace carbon dioxide emissions. There are always carbon-intensive industries and companies who will make the case for special treatment and avoid paying. And the end consumers will always shoulder the added cost burden. After all, we can’t have the profits and share price of our major energy companies dented, can we ?

Much education needs to take place – the debating chamber of the British Parliament is only one place. We also need to get proper energy reporting from the mainstream media. It’s wrong to continue to blame solar panels and wind farms for future energy bill price rises.

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