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Tue Apr 30, 2013, 09:25 AM

(UK) Am I paying a lot for 'green' energy?

Am I paying a lot for 'green' energy?
How much more is so-called green energy adding to my bill?

Lucy Siegle
The Observer, Saturday 20 April 2013

'Goodenergy.co.uks local-energy tariff offers those living next to wind farms of over 4 megawatts a 20% reduction in their energy bill': Lucy Siegle on green energy incentives. Photograph: Alamy
My answer ought to reflect the hideous complexity of the energy industry, incorporating such factors as degression mechanisms and carbon-floor pricing. It should have a whiff of rancour, mirroring the internecine warfare that rages around UK energy policy. Finally, it should feel totally desperate, taking its cue from the upcoming one-in-12 chance of blackouts as predicted by Ofgem.

But if you don't mind I'm going to park all that. At the risk of sounding like the ultimate hippy, these negative vibes are not getting us anywhere.

The simple answer is that green energy is not costing you nearly as much as you've been led to believe. Yes, energy bills have soared. A new government report analysing the cost of energy and climate-change policies on the cost of energy lays the blame squarely at the feet of global gas prices, followed by network costs. So 47% of your bill (assuming you have an average usage of electricity and gas) is attributable to wholesale gas and electricity costs; around 9% is attributable to the cost of policies, which includes those that decarbonise (or green) the supply. Support for renewables roughly adds up to 20 on the cost of the average bill. From 2004 to 2010 dual-fuel bills rose by 455, of which 382 was due to soaring gas prices. You might argue that sleepless nights should really be caused by the Dash for Gas championed by some areas of UK policy, not least the treasury rather than the expense of renewables.

Renewables were subsidised to the tune of 1.4bn in 2010 (gas, oil and coal were subsidised to the tune of 3.63bn). And if the price of fossil fuels drops, they become comparatively more expensive per unit of energy. But research shows that rather than inflating our power bills, if there had been zero climate-change and energy policies (the so-called Do Nothing scenario) we'd be paying 64 (or 5%) a year more for gas and electric.

So ...


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