PMQs: Cameron wrong to say green energy equals higher bills

Contrary to what David Cameron said during today's PMQs, decarbonising the power sector would actually lead to bills coming down.

David Cameron said during PMQs today that a decarbonisation target would cost every household in Britain at least £120.

Fortunately – or unfortunately for Cam – associate director of IPPR and Left Foot Forward founder Will Straw has looked into this already, and has found Cameron’s claim to be without foundation.

As Straw points out:

“if Britain invests in high levels of gas, as the Treasury seems to prefer, it will inevitably expose consumers to rising and volatile gas prices. Indeed, in a scenario where emissions intensity is only reduced to 200g CO2/kWh as set out in the government’s recent gas generation plan, energy costs could vary by as much as £229 per household by 2030.”

Meanwhile the cost of onshore and offshore wind is actually coming down comparative to gas, as the graph below demonstrates.

Cost of energy

In other words, relying on gas and building more gas power stations will actually cost the economy a further £312 million – and up to £478 million if gas prices are higher than expected. This, the IPPR calculates, is the equivalent of £10 to £15 per household.

By contrast, decarbonising the power sector and eliminating polluting gas would mean that energy costs were only likely to vary by around £51 per household.

This would not mean an increase in energy bills, however. On the contrary, it would result in small cost savings – across the economy of at least £163m if gas prices rise in line with expectations.

As Straw adds: “If gas prices are at the upper bound of expectations, the saving from going green could be £249m.”

10 Responses to “PMQs: Cameron wrong to say green energy equals higher bills”

  1. Jen

    I read somewhere once that for the price of building and running a nuclear power station (and the massive costs of disposing of nuclear waste) instead we could provide all residential houses with free solar panels and mini roof wind turbines, boosting the industry, creating loads of jobs and making everybody more self sufficient, thus not having to rely on totally the national grid and outside gas resources. The government buying in bulk would make it more cost efficient. This would massively bring down bills for the households and less need to build more power stations. Couple this with giving tax breaks to companies who manufacture the most energy efficient electrical goods. Insisting all new builds are as energy efficient as possible, or at least all social housing. We all become more self sufficient and energy providers ourselves if we are low usage. I would be interested if someone could so costings and compare, especially as I read this several years ago and the price in solar has come down since then. If so it could be extended to small businesses and large business/corporates could buy their own as it makes good financial sense in the current global gas market. The average investment is about 11% over 7 years I was told recently with solar, so that’s better than a savings account investment.

    Innovation is the only way to solve the energy crisis. Using outdated technology and energy sources are not only bad for the environment, it makes no financial sense – except to the giant energy companies who like holding the world to ransom for massive profits.

  2. Andy Mayer

    Were energy and raw material prices so predictable this would be broadly correct. The issue with Will’s argument, and the very certain way it is presented here, is that is not the case.

    We do not know what gas prices will be next year, let alone in 2035, and the sort of innovation that drives down renewable costs also drives down costs in gas – shale exploitation being the most topical exampke

    Further if we’re sure offshore wind in 2035 is going to cost 40% less than today, that’s a good argument for waiting on deployment – not bumping up taxes to buy expensive kit. All that does is undermine UK competitiveness, paradoxically making it less not more likely that green manufacturing will come to the UK. Wind turbines require energy-intensive inputs, for concrete, steel, plastics and electronics – they are not woven from hemp by volunteers.

    In short a sustainable low carbon transition requires affordable energy. Today that means more gas and a cautious stimulus programme for alternatives for tomorrow. It means international collaboration and partnerships for innovation not unilateral green chest beating or offering false certainty that these choices are easy or obvious.

  3. Selohesra

    Perhaps Cameron was referring to todays prices rather than some hypothetical scenario still some 17 years away?

  4. uglyfatbloke

    Jen… if we enable people to produce efficient an affordable renewable energy precisely where it is used it would reduce the profits of energy companies and therefore the number of directorships that can be handed out to failed politicians and the size of donations that energy corporations give to political parties. Next thing you know people will be demanding free speech and civil liberties!

  5. uglyfatbloke

    Jen… if we enable people to produce efficient an affordable renewable energy precisely where it is used it would reduce the profits of energy companies and therefore the number of directorships that can be handed out to failed politicians and the size of donations that energy corporations give to political parties. Next thing you know people will be demanding free speech and civil liberties!

  6. Sarah

    Will’s argument seems a bit over-simplified. What about the back up generation for intermittent renewables? Wind can’t power Britain alone and surely the cheapest way is to use gas as a bridge fuel? Unless he is saying that new nuclear should provide our back-up power, but the cost of this clearly isn’t factored into the savings he claims above.
    Come on Will, talk to the public like sensible adults!

  7. Chrisso

    Jen – you say ” I would be interested if someone could so costings and compare, especially as I read this several years ago and the price in solar has come down since then. If so it could be extended to small businesses and large business/corporates could buy their own as it makes good financial sense in the current global gas market. The average investment is about 11% over 7 years I was told recently with solar, so that’s better than a savings account investment.”

    I installed PV solar two years ago and won’t get the money back that was put on the roof until a further seven years has elapsed. I only start getting a ‘return’ on ‘investment’ from years 10 to 25 that the feed-in tariff pays. That is not 11% over seven years. IF I live more than a few years beyond the next seven, IF I don’t move house, IF I don’t have to replace my inverter (cost about £1000 at present) then it will have been a sound investment and I shall have made a small contribution (3 megawatts a year) to the local grid.

    I do already benefit from the electricity savings, for sure. But the key factor is that I am now particularly energy conscious. This is the value-added transformational aspect, every household with solar becomes much more aware of energy economy. That will ultimately benefit our national fuel economy. Roll-on the roll-out.

  8. Repeal the Act!

    Lord Deben of Climate Change Committee appeared before the Science and Technology Committee this morning and said decarbonisation would cost £120

    http://www.bishop-hill.net/blog/2013/10/9/deben-before-the-ecc.html

  9. slasha666

    The government is in cahoots with the energy companies to pedal their wares at inflated prices and in some case are probably shareholder!

    Building new Nuclear power station is about the most expensive way in the short term and not forgetting that it will take at least 10 years for a new nuclear power station to be built.

    Also renewables are becoming more efficient and cheaper to produce each year and new carbon nano technology will boost efficiency substantially also new energy storage technologies are just round the corner making it even more viable.

  10. Richard

    I sure this wont be a popular post but here goes anyway…

    Will Straw is wrong on several counts:

    1. The graph was
    based on extremely flawed and tenuous research and bares no relation to any
    projected price model I have ever seen in my time working for oil or energy
    companies.

    2. It assumes a
    continual drop in the costs of running wind generation and a continual rise in
    the cost of gas. Again this is flawed as
    a substantial part of the cost of a wind turbine is going to be energy and raw
    materials (all of which have been rising in price over the last decade).

    There is lots of evidence that shows that the decreases in
    the cost of wind generation is actually from economies of scale and not
    technical efficiency. So in other words
    to meet this graph you would need to rely on some as yet unthought-of, un-researched,
    unknown technology.

    3. As has already
    been pointed out before in earlier posts it assumes no cost of backup capacity
    if wind does not generate.

    4. It trots out the
    old ‘volatile gas price’ argument. It
    would be great if politicians could do their research. Gas naturally has less volatility in its
    pricing than electricity ever will (FACT).
    This is a technical feature of its supply train and will be almost
    certainly be as true in 2030 as now.

    If anyone want to know why please feel free to make contact
    and I will explain further.

    5. It ignores the EU
    3rd Energy Package and our links to other European markets….. and this is
    important people.

    Because our markets are now linked and are being
    increasingly linked to European markets (the 3rd Energy Package requires
    this). In fact the dominant traded
    electricity hubs in the EU are the German markets and Nordpool and these tend
    to set the base price for the rest of the EU.

    The means that even if wind generation was free then the
    wholesale price would not be free it would be set by the marginal European
    price. All other prices would be set at
    a differential to this price (the diff being based on the transport costs).

    6. If the evidence is
    so great that the experts are convinced that wind will be so much cheaper than
    gas/coal/oil/nuclear why would anyone want to build anything other than
    wind??? You wouldn’t need a subsidy as
    banks, financiers etc would be falling over themselves to get there first.

    So what are the real issues?

    1. The Big 6 should
    never have been allowed to own both generation and supply. Attempts to separate will now be painful and
    tortuous.

    2. Politicians from
    all sides largely want to be ‘seen to be green’ rather than to be honest or do
    the right thing. This means that the
    cost of green subsidies are often hidden in other costs (e.g. the National Grid
    charges).

    3. Consumers should
    have a full breakdown available of all costs including all government
    initiatives.

    4. The regulatory
    regime is hugely complex and should be simplified. It should also scale so smaller suppliers
    have less obligations than the biggest.
    The whole industry knows that you need 1m domestic customers to be able
    to compete and this is why no new supplier is willing to invest as the cost of
    competing is so great until you get to scale.

    And, Hold your breath…

    5. Many of the
    existing subsidies should be scrapped and the money should be focused on energy
    efficiency measures for the poorest in society.

    All of the independent value for money research I have seen
    demonstrates that the quickest, most cost effective way of cutting carbon is to
    not produce the electricity in the first place.
    Plus it saves the person money.

    I have never been able to get decent figures for who (ie
    which parts of society) benefits from all the various regimes but I am fairly
    sure that the past/existing schemes are largely benefiting the voting middle
    classes.

    Lastly the poorest in society have the least insulated,
    least efficient white good etc and it is crazy that we do the least to help
    them.

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