As energy prices continue to — with British Gas imposing a 9.2 per cent rise — the government is under growing pressure. The tragedy is that any genuine solution to the largely self-inflicted energy fiasco will not be considered let alone enacted any time soon – as we can tell by the recent outings of the climate change secretary Ed Davey.
The controversy about the proportion of green taxes on energy bills looks trivial compared to the tornado that is going to hit parties in coming years – as the government’s self-imposed decarbonisation targets drive energy prices up relentlessly. If the rise in wholesale gas prices is seen as a crisis, just consider the effect of an Energy Bill that will increase green energy subsidies by a factor of five — to a staggering amount of nearly £50 billion by 2020. This is precisely what’s now going through parliament.
Yet when it comes to the cost estimates, Ed Davey and other advocates of low-carbon energy promise consumers the earth: households would only be charged a pittance which would steadily decrease in years to come. Scrapping green taxes would actually increase energy bills, Nick Clegg has asserted.
A look at Germany which started the transition to green energy much earlier than Britain shows a different picture. Over the years, almost all predictions about the cost of renewable energy have turned out to be wide off the mark – at least by a factor of two, sometimes by a factor of five.
These days, Ed Davey gives very similar price assurances and makes the same predictions as his German counterparts years ago. In his interview with Andrew Marr last weekend, he claimed that most of the green energy taxes are due to policies that reduce fuel poverty:
‘One of the reasons why we’re seeing big energy price rises is the cost of wholesale gas on international markets. Now neither I, you or Ed Miliband can do anything about that. But over 50% of the gas price (fluffs) … the gas price has gone up by over 50% in the last five years and over 50% of the bill is wholesale gas prices. We’ve also seen a big increase in the network costs because you’ve got to replace ageing networks… so these are costs which are impossible to avoid but I do believe we need to do evermore to help people, particularly vulnerable people, people suffering fuel poverty.’
What he did not mention is that green subsidies to producers of non-carbon energy — notably wind power – are already adding 17 per cent to our electricity prices.
Mr Davey also claims that the coalition’s energy bill will push energy prices down rather than up. On Thursday’s Newsnight he even maintained that ‘energy bills will be lower’ because of billions in low-carbon investment. Yet even his own department estimates that subsidies for low carbon electricity generation will add an additional £95 a year to the average household energy bill by 2020.
As for nuclear, Davey has this to say about the deal with China and France:
‘I’ve been looking at it in minute detail and we’re extremely close for a deal with EDF and if and when we get that deal I’ll announce it to parliament and I think I’ll be able to show that it’s extremely good value for money for consumers, helping people with energy bills long- term.’
Extremely good value for money for consumers? The deal turns out to be a government guarantee that will force consumers to pay EDF a price at least double the wholesale market price for electricity – for the next 35 years.
The green minister is proud of the last few years, telling Marr:
‘We’ve seen massive investment in low carbon. The amount of renewable energy in this country has doubled since the Coalition came to power. It’s now nearly 16 per cent, that’s a huge success. That’s billions of pounds of investment.’
What he doesn’t say is that the amount families have to pay as a result of policy-driven levies has risen ten-fold in the last ten years.
He bemoans that the gas price has gone up by over 50 per cent in the last five years and claims this to be the main reason for price rises. Yet he fails to mention that the drilling company Cuadrilla was granted a UK fracking licence back in 2007, but that his government -and the last one – have been blocking or delaying the extraction of cheap and abundant UK shale gas for more than five years.
And as for wind farms? Marr made a good point:
Andrew Marr: Can you look me in the eyes and say that our wind farms, our on-shore wind farms have been good value for money?
Ed Davey: Absolutely. What people don’t understand is they only get paid when they generate electricity.
In reality, wind farms have been paid around £30 million a year in compensation to switch off or slow down their turbines during periods when the National Grid is unable to cope with wind power produced during high winds or periods of low demand.
Clearly, the minister is making it up as he goes along. This is always a problem when all three parties are parrotting the same line: there simply is no challenge.
In reality, the coalition’s Energy Bill will inevitably lock Britain into ever higher energy prices. What is more, the bill’s whole approach is absurd.
First consumers are forced to pay ever increasing subsidies on costly wind and solar energy; secondly they are asked to subsidise nuclear energy too; thirdly, they are forced to pay another level of subsidies for the provision of inefficient back up power needed by unreliable wind and solar energy; fourthly, consumers are additionally hit by multi-billion subsidies that become necessary to upgrade the national grid; fifthly, the cost of power is made even more expensive by adding a unilateral Carbon Price Floor. Finally, because Britain has created such a foolish scheme that will cripple industries, consumers are forced to pay even more hundreds of millions in subsidising the energy-intensive sector.
Worst of all, the biggest risk posed by the Energy Bill, if enacted and implemented in its present form, would be to undermine the chances of a shale and cheap energy revolution as it would lock Britain into legally binding, 20-35 year contracts for costly nuclear and exorbitant renewable energy.
Over the last two decades, the green energy strategy was founded on two fears: first, that global warming was an urgent threat that needed to be prevented imminently and at all costs; and second, that the world was running out of fossil fuels, which meant oil and gas would become ever more expensive. Both conjectures, however, turned out to be wrong.
It is doubtful that policy makers are ready to admit that climate policy and the world’s energy outlook have changed radically and that a reassessment of outdated assumptions is now required. I’m afraid it will get worse, much worse, before it will get better.
Benny Peiser is the director of the Global Warming Policy Foundation
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