How can anyone guess their energy bill for 2020?

13 Jul 2009, 16:17

I know that in terms of unpopular public statements sympathising with politicians is currently right up there with suggesting the music of Michael Jackson was a tad derivative, but I can't help feeling a bit sorry for ministers at the Department of Energy and Climate Change.

As the countdown towards its long anticipated renewable energy strategy enters its final days, the battle for supremacy between the various factions in the UK energy industry has escalated from its usual rats-in-a-sack level of viciousness to something closer to full scale warfare.

The CBI, ever quick to do the bidding of the traditional energy firms, has called on the government to downgrade wind energy targets and step up its focus on nuclear and carbon capture and storage, while the wind lobby has hit back with a series of reports suggesting the UK grid will cope just fine with a huge increase in wind energy. The solar and micro-renewables sector, meanwhile, was last spotted over in the corner of the room bellowing "don't forget about us" as loud as its little lungs could manage. The biomass and waste-to-energy guys would like to do a bit of shouting too, but sadly they don't like to draw too much attention to a technology that many green groups still equate with incineration.

The net result is that everyone will be disappointed by the government's renewable energy strategy when it is finally announced on Wednesday. All the various energy tribes will complain that there is not enough support for them, or that where there is enough support, as is likely to be the case for wind and nuclear, there is still not enough effort being put into streamlining planning decisions. The green groups for their part will once again claim, with some justification, that we do not need yet another renewable energy report - we need concerted action now.

Of course, energy and climate change secretary Ed Miliband and his ministers fully expect this reaction and will not be asking for any sympathy as long as they get a fair hearing. But nor will they get that fair hearing. In fact, if the tenor of the reporting over the weekend is anything to go by they will get the exact opposite.

Various reports over the weekend trailing Wednesday's announcements led on the fact that the planned increase in renewable energy capacity will result in a rise in average energy bills of between £200 and £230 a year. My immediate assumption was that the government had once again leaked the key figures ahead of the report, but according to DECC this was not the case and the projected bill increase of £200 bears no resemblance to anything to be found in the forthcoming report.

Leaving aside the question of where the £200 figure came from (and personally, I would not rule out a back of an envelope calculation), DECC knows that regardless of what Wednesday's report contains the main focus from the press will be on this issue of how much renewable energy will cost the average punter. The government will likely pander to the calls from Fleet Street with its own figures, despite the reality that such figures are all but meaningless.

The fact is that any attempt to second guess the impact of renewable energy investment on energy bills is couched in so many caveats and assumptions to be meaningless.

The suggestion that investment in renewables will lead to bill increases of over £200 by 2020 implies that we know what energy prices will be by that date if we don't invest in renewables. But this is an absolute fallacy. We do not know with any real confidence how energy prices will behave next year, let alone in ten years time.

If those who reckon oil supplies will peak some time around 2015 are proved right then by 2020 soaring oil and gas prices could easily mean that average energy bills would be far higher had we not invested to increase our renewable energy capacity. Or what price the 2020 Kremlin turning off the taps and blocking gas imports to Europe, sending fossil fuel prices through the roof. Similarly, breakthroughs in solar energy technology or a spike in the price of carbon could manipulate the price of energy up or down in ways that no one yet fully understands. Or the government's proposals for green home loans could actually work, leading to a huge reduction in energy demand and a commensurate fall in average bills.

We do not know with any confidence how much a renewables based energy mix will cost by 2020, just as we do not know how much a fossil fuel based energy mix will cost. Anyone who says otherwise is lying.

What we do know is that all households and businesses would be wise to invest in energy efficiency as a matter of urgency, on the grounds that energy bills will rise under both a do-nothing scenario and a renewables investment scenario. The difference between the two scenarios is that under the do-nothing scenario the planet cooks and energy costs will eventually rise indefinitely as fossil fuel supplies dwindle, while under the renewables scenario not only will energy prices eventually plateau (the wind and sun are, after all, free) but we will also realise many associated economic and environmental benefits, such as reduced carbon emissions, increased job creation and improved energy security.

It would be nice to read a headline in the papers on Thursday morning explaining how new wind farms could actually help lower energy bills and improve energy security, but sadly there is more chance of Ed Miliband announcing the new strategy in the Commons with Michael Jackson's Earth Song playing as an inspiring backing track. Now that would definitely get reported.

  

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Previously known as the BusinessGreen Blog, James' Blog features musings, observations and occasional rants from BusinessGreen editor James Murray

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