The UK’s low-carbon strategy is all about keeping the cost down

In the UK government’s low-carbon strategy, published today, one number stands out in several hundred pages of analysis and forests of statistics: 8 per cent.

That is the expected increase in domestic energy bills as a result of the measures that are being put in place to cut the UK’s emissions by 34 per cent from their 1990 levels by 2020. It works out at about £92 per year on the average bill, or less than £2 per week: an amount that the government hopes the public will be prepared to accept as the price of saving the planet.

To get to that number, however, officials have had to strain every sinew.

The raw effect of boosting renewable energy in Britain, from about 6 per cent of total electricity generation today to 31 per cent by 2020, and from about 1 per cent of heat to about 12 per cent, would be to add about £249 to the average yearly bill: a much less palatable figure. The new wind farms that the government wants built, especially the offshore ones, are more expensive than old coal and gas-fired power stations. The government estimates that the renewable sector will need £100bn of investment to hit its targets, and that investment can only be paid for through energy bills.

So to alleviate the impact on consumers, the government is pushing through a stack of measures designed to cut their energy bills. There are pilots of a new “pay as you save” scheme to finance domestic insulation, and other domestic energy efficiency programmes will be extended. Ofgem, the energy regulator, is being given a new remit to focus on consumer protection and carbon reduction as well as competition in energy markets, and will be given new powers to meet it. A new mandatory social tariff, forcing energy suppliers to charge less to their most vulnerable customers, which will probably be targeted on low-income pensioners, will be introduced in 2011.

Even the new feed-in tariff, guaranteeing a set price for electricity sold to the grid by small generators below 5MW, has been rebranded as the “clean energy cash-back”, to help market it as a money-saver or even money-maker for consumers.

Those figures for costs in the UK are very similar to the US Environmental Proetction Agency’s estimates of the Waxman-Markey emissions reduction bill, which set the cost at about $98-$140 per household in the US, with an average increase of 6 per cent in household energy prices, to deliver less ambitious CO2 reductions.

Even after all the efforts the British government has made to keep the cost down, it is clear there is likely to be some resistance from consumers.

National Energy Action, which campaigns against fuel poverty, said today:

British households will face higher gas and electricity bills to cover the expansion and investment costs of new generation and home insulation programmes… NEA has been pressing hard for a social mandate on energy tariffs and we are pleased that the Government has included this in their Transition Plan, we are however concerned at the timeframes involved and the potential narrowing of assistance to pensioner households when millions of low income families are also in fuel poverty and need access to lower tariffs and protection from rising prices. “

If it looks as though cutting carbon dioxide emissions is going to push prices up even further, or the impact on vulnerable groups becomes too severe, then sticking to the emissions reduction startegy may no longer be politically sustainable.

Related link:

Ed Miliband, UK energy secretary, talks about his low carbon strategy on YouTube

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