THE BLOG
27/10/2013 15:13 GMT | Updated 24/12/2013 05:12 GMT

The Inconvenient Truth Behind Rising Energy Bills

If the government is serious about getting hold of bill rises then renewables is the wrong place to look... Even if we ended all support for renewables and didn't build a single more wind turbine, wave array or tidal generator, the prices of our energy bills would continue to rise.

Earlier this month I wrote about the danger of losing political consensus on energy. Sadly, my warning of the dangers of this wasn't heeded. By now I don't think there is anybody in the energy sector who hasn't heard about the Prime Minister's pledge to roll back 'green levies'. If it was designed to cause a stir then it has certainly achieved that outcome. What comes next are the questions of what how and, most importantly, why?

There has been a great deal said in the past couple of days about these 'green levies' with some claiming that ending support for renewables is one path for bringing bills down. Right now there is a bad whodunit being played out. Everyone wants to know who is responsible for rising energy bills, but the wrong person has been blamed. The fact is that blaming renewables for bill rises may be convenient but it is not true. Moreover it ignores the inconvenient truth behind energy bill rises.

So let's start by looking at the facts. Rising energy bills are a major concern for everyone, and nobody can deny they have been rising. In fact over the past eight years the average duel energy bill has gone from about £600 a year to about £1200 a year. Of this £600 rise, £37 has been linked to support for renewable energy projects. Now £37 is not to be sniffed at but the fact is that leaves a rise of £563 in people's bills which has absolutely nothing to do with renewables at all.

Wind energy itself has added less than £20 a year. That's less than £1.50 a month. Maybe you don't want to spend any money on wind energy. But if your main aim is to find out what is driving up your bills, then you need to start with the £563 of that £600 increase and ask what caused that because it wasn't wind energy or other renewables. But too many people don't want to ask this question, and instead point a lazy finger at renewables.

So what is that £563 rise all about? Well a lot of it is due to the continuing rise in the price of wholesale gas. That is one of the reasons why investment in renewable energy is so important. It allows us to be less reliant on expensive, imported fossil fuels, like gas, and as a result take control of our energy future. It is also important to remember Government has already capped the total amount that can be spent on renewables to protect consumers. In contrast, consumers have no way of capping costs coming from the relentless rise in gas prices, and that's why we keep seeing these big leaps in bills.

Some of the rest of it is about investing in our electricity grid network, which has been neglected for a long time and which needs to happen if we are to have a properly functioning 21st Century grid network. Of course the cost of this has to be carefully managed but it is not in the interests of anyone to have a creaking grid network that can't handle the power we need.

So if the government is serious about getting hold of bill rises then renewables is the wrong place to look. It is the wrong place to look for two reasons. Firstly, the support for renewables and in particular wind is such a small part of the rise we have seen in recent times that it would not make the type of difference that people want to see.

Secondly, and here is the inconvenient truth, even if we ended all support for renewables and didn't build a single more wind turbine, wave array or tidal generator, the prices of our energy bills would continue to rise. The current fleet of gas and coal powered stations are coming to the end of their lifespan and need to be replaced. We can either replace some of them with low-carbon projects, which will cost money, or we can replace them with more gas and coal powered stations, which will cost money. The only difference between these two scenarios is that we know what the first one will cost and have little idea what the second one will cost. The first scenario keeps us in control of our energy supply, the second one keeps us at the whim of the international market which we have no control over.