Low-carbon subsidies have not led to higher bills

Extra costs from low-carbon generation more than offset by savings from energy efficiency, says Committee on Climate Change.

The government’s climate change watchdog has hit back at claims that households’ energy bills have been forced to rise by policies to subsidise low-carbon generation.

In a hard hitting assessment of the impact of policies to boost delivery of a lower carbon grid, the Committee on Climate Change (CCC) concludes that increases in powers bills to subsidise such generation were more than outweighed last year by savings resulting from energy efficiency.

It says the typical annual dual fuel bill in 2016 was £115 less in real terms than it was when the Climate Change Act was passed in 2008.

The CCC’s fourth independent assessment of the impact of carbon budgets on energy bills shows that measures to support the transition to a low carbon electricity system pushed up the average household energy bill by £9 a month last year.

However, the analysis also concludes that these additional bills were more than offset by savings of more than £20 a month from reduced demand for energy. The bulk of this reduced demand resulted from the replacement of older lights and appliances, such as fridges and boilers, with more energy efficient models when they are worn out.

In 2016, according to the CCC analysis, costs resulting from low carbon policies accounted for roughly nine per cent of the average dual fuel household bill of around £1,160.

Meeting the fifth carbon budget target that 75 per cent of energy should be generated from renewable sources by 2030 could add a further £85 to £120 to the average annual fuel bill, increasing the total impact of such policies to around £200 per annum.

However, this could again be more than offset by further improvements to energy efficiency, which could knock around £150 off the average household bill.

The report also dismisses concerns that policies to support the transition to a low carbon grid undermined the UK’s economic competitiveness. Climate-related policy costs could have added three pence onto the cost of an average £10 basket of goods and services, according to the committee.

And it says that while the UK has higher electricity costs than European counterparts like France and Germany, this is the result of higher network and wholesale costs, which the committee has called for an investigation into.

CCC chairman Lord Deben said that UK emissions had fallen by 38 per cent over the last 25 years, while GDP had risen by almost 65 per cent over the same period.

“The UK’s progress to reduce emissions and its comparative advantage in important areas such as the automotive sector, offer opportunities for future growth and employment while delivering vital action to tackle climate change.”

 The CCC was established under the 2008 Climate Change Act to monitor the government’s progress in meeting the targets laid out in the legislation.

The latest assessment follows the publication of a recent report by the House of Lords economic affairs committee which identified green energy subsidies as the key factor driving up customers’ fuel bills.

Richard Black, director of the Energy and Climate Intelligence Unit, said the CCC’s report showed that policies to cut carbon emissions had “largely worked” and that consumers had benefited.  

“Even better, this is set to continue – provided government cracks on with the job of introducing new energy efficiency policies. The UK lags well behind many other developed nations in boosting energy efficiency, which is often the lowest hanging fruit on the policy tree, and doing so effectively would give UK plc a leg-up on international competition.”

Black added that the government had a “golden opportunity” in its industrial strategy to build the smart energy system that would boost jobs, lower energy prices and decarbonise the economy. 

Author: David Blackman, policy correspondent,
Channel: Customers , Policy & Regulation
Tags: Energy Efficiency , Government and NGOs , Customer Management , Committee on Climate Change

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