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The Center for Policy Studies (CPS), a free-market British think tank, says the UK’s effort to comply with European Union rules for lowering carbon emissions is turning out to cost consumers more than the government is willing to admit and will end up being “the most expensive policy disaster in modern British history.”
The government subsidizes renewable energy sources such as solar wind power to get them up and running, and these costs are passed on to retail customers in the form of “green levies” on their energy bills.
The EU says Britain must generate 15 percent of its total energy – transportation, electricity and heat – from renewable sources by 2020. The government issued a report in 2014 saying a typical British household today pays £68 (about US $101) a year to offset the subsidies and in carbon taxes, which amounts to an increase of about 5 percent on its annual energy bill.
Yet by 2020, the report says, as the government pays to build more solar and wind farms and increases carbon taxes, the cost for utility customers will rise. The CPS report says reverting to gas and abandoning renewables would save the average household an extra £214 (about US $320). Government ministers have argued that savings would be much smaller, £141 (nearly US $211) per household each year.”
“The costs of intermittent renewables are massively understated,” the CPS report says, but government ministers are deliberately masking them in order to “hide the full cost and operational implications” of renewable power.
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Building new wind and solar farms isn’t the only source of government expenses that is passed on to consumers. The CPS says there’s also a need to build back-up gas- and coal-fired plants to ensure power on days when there’s no wind or sun to power alternative energy sources. This, the report says, “wrecks the economics of conventional power stations.”
The government also must pay the initial cost of new cabling to bring power from the renewable energy sources to remote parts of the UK, including islands far off the coast. This, too, the government ignores when assessing the cost of complying with the EU rules on carbon emissions, the report says.
“To keep the lights on, everything ends up requiring subsidies” and a “patchwork of interventions,” the CPS report says.
The report concludes that if the government truly intends to comply with the EU’s energy goals, it should once again nationalize Britain’s energy infrastructure. That way, it says, it would immediately save money by not having to subsidize private companies, which must, by their nature, turn a profit.
Such a shift would save the average British household an estimated £92 (US $137) per year by 2020, the CPS concludes.
Responding to the report, a spokesman for the Department of Energy Climate Change said, “The figures in this report don’t add up and ignore the urgent need to cut our carbon emissions. We are making sure we can keep the lights on, cut carbon emissions and keep bills down for consumers.”
By Andy Tully of Oilprice.com
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Andy Tully is a veteran news reporter who is now the news editor for Oilprice.com