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Climate Change

Switch to low-carbon future would save households £1,600

A saving of £45bn should be good news,  but the study’s conclusions clash with the pursuit of gas

British households will save £45bn, or £1,600 apiece, if the government hitches its electricity supply to low-carbon sources such as wind and nuclear rather than gas, a parliamentary advisory committee has estimated.

Overturning the general consensus that green electricity is more expensive than gas-generated power, the committee finds that while “decarbonising” the energy supply will cost more in the next few years, the expense will quickly become negligible and will start paying handsome dividends after 2030.

This makes it essential for the government to stimulate tens of billions of pounds of investment in low-carbon energy by voting through a proposed amendment to the Energy Bill that would make the UK’s electricity supply almost entirely green by 2030, insists David Kennedy, of report author the Climate Change Committee (CCC).

Furthermore, even if hopes that Britain is sitting on vast amounts of accessible shale gas prove correct – which won’t be clear for at least a few years - the case for a low-carbon energy revolution in the UK is still “robust”, adds the CCC, an independent body set up to advise the government on climate change.

Tim Yeo, the Conservative MP behind the proposed amendment that will be put to the vote on June 4, said: “There has clearly been quite a big attempt to portray decarbonisation as a huge burden to the consumer. But this report provides a robust rebuttal to that argument on anything but a short-term basis.”

Mr Kennedy added: “If MPs are wondering whether to commit to low-carbon energy on the basis that it has significant costs and no benefits, the evidence here shows this is not the case. There is a clear benefit and limited costs.”

The report is so significant because it takes a much longer term view than previous studies and provides by far the most comprehensive analysis of the relative cost of gas and low-carbon energy sources.

It concedes that subsidies already in place to green Britain’s energy supply will add £100 to the average annual household energy bill between 2010 and 2020. Furthermore, the path to a predominantly green energy supply - in which 90 per cent of electricity is generated from low-carbon sources by 2030 - would add a further £20 by the end of the next decade.

But after that, the upfront costs of renewable energy plants such as wind and solar, will have been largely paid for, while developments in fledgling low-carbon technologies will dramatically reduce its cost – meaning that by 2050, consumers will be much better off than if the energy generators focussed that investment on gas power plants.

The report will exacerbate tensions between George Osborne’s gas-focussed Treasury and the Department of Energy and Climate Change, whose secretary Ed Davey is a key advocate of clean power. Mr Davey wants a decarbonisation target to be included in the Energy Bill and to apply from next year, while Mr Osborne is pushing to defer a decision on whether to introduce a decarbonisation target until 2016.

Mr Davey told The Independent: “In the long term, low-carbon could be  a much cheaper path to go. Our opponents don’t want to admit that we really do care about people’s bills, but actually I’m the consumer’s champion here.”

“The real reason for high energy bills is high global gas prices. I can’t control global gas prices but I can put a cushion between the high global gas price that people face and the bills consumers pay,” in part by supporting low-carbon power generation, he added.

The CCC and others argue that the uncertainty associated with delaying a vote until 2016 is putting off the potential investors Britain desperately needs to fund a much-needed overhaul of its energy system. Investors in everything from coal and gas-fired plants to wind turbines need to have a clear idea of their likely returns before agreeing to finance a project and cannot do this until they know how much of Britain’s energy will be required to come from low-carbon sources in the coming decades.

Britain is legally bound to generate 15 per cent of its energy – or about a third of its electricity – from renewable sources by 2020. But unless MPs vote through the 2030 decarbonisation amendment, there will be no low-carbon electricity target beyond 2020 – for at least the next few years. But the CCC report argues that it is crucial to invest heavily in low-carbon energy throughout the 2020s, warning that “the currently high degree of uncertainty about development of the power system beyond 2020 threatens to fundamentally undermine electricity market reforms”. 

The CCC’s £45bn estimate represents the value of savings in today’s money that British households would collectively make between 2020 and 2050. It is based on expected changes in the price of gas and the penalties big companies will face for their carbon emissions and could potentially rise as high £100bn – or more than £3,000 per household – if those figures have been substantially underestimated.