A regular claim made by those who are skeptical of climate change is that green subsidies are increasing energy bills and driving people into fuel poverty. I came across the figure below which indicates that energy, climate change & social policies are adding £112 to the average bill (9%). If, however, you break it down (as the figure does) £47 is energy saving costs for low-income homes and £11 is the warm home discount for pensioners. These both seem like perfectly reasonable things to be providing (help for those on low-incomes and pensioners). There are a few other costs, that aren’t labelled, but if everything else is associated with renewables, it’s now only 4.3% directly associated with subsidising renewables. The figure also claims that without these green measures, the average bill in 2020 would be £166 higher than it will be with the green measures.
The reason I thought I would write about this is that I also heard Ed Davey, the Secretary of State for Energy and Climate Change, on the radio today. What he said seemed entirely consistent with what the above figure suggests. He also indicated that the main reason for the rise in energy bills is that the cost of natural gas has risen by 50% in the last 5 years. Furthermore, energy company profits have increased from £2 billion a few years ago, to around £3.5 billion now. Given that the UK has around 15 million households, this is around £233 per household and very close to the other supplier costs and margins category, in the figure above.
So, as far as I can tell those complaining about green subsidies are essentially arguing for less help for those on low-incomes and for pensioners and are, somewhat conveniently, ignoring that the main reason from the recent rises in energy prices in the UK is that the cost of natural gas has increased by 50% in the last 5 years, and – over about the same time period – profits have increased by more than 50%. I think that rising energy costs are indeed a worry and something that we should be trying to do something about. However, claiming that it is all due to green policies appears to be wrong and there is evidence to suggest that these green policies will actually lead to reduced energy bills in the medium-term. In my opinion, this is an important issue and we should at least be willing to be honest about what is driving up energy prices and also be realistic about what we can do to prevent energy bills from rising higher than is necessary.