Dominic Lawson: The staggering cost of renewable energy

The commitment will lead to an increase of about 40 per cent in annual electricity bills
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The Independent Online

When the political wind changes direction, it can leave a Prime Minister looking very silly – almost as if what mothers used to warn their children about not pulling faces was actually true.

Thus Gordon Brown's last Budget, which removed the concession of a 10p in the pound tax rate for millions of the least well paid, was thought perfectly acceptable at the time, including by the vast majority of Labour MPs, who had cheered the then Chancellor in the House of Commons. Now – as its measures are just about to come into force – it is almost universally excoriated: how could Gordon have been so insensitive?

The reason for this near-180 degree shift in sentiment is not hard to find. Food prices have risen sharply since Brown's final Budget – and so, even more, has the price of heating a home. These are items which form a very significant percentage of the domestic budgets of the least well-off, so they now feel understandably furious to be faced with a government-imposed drop in take-home pay.

This bitter atmosphere lends particular piquancy to a long-arranged meeting later this week between the Business Secretary, John Hutton, and the country's six largest suppliers of energy – the so-called "fuel poverty summit". The Government is understandably concerned about further imminent increases in electricity bills, especially against the background of consumer groups such as energywatch loudly protesting that "an increase in utility bills of 25 per cent will consign another million households to fuel poverty".

Up until now, it has been possible to blame such increases in costs on the rise in the wholesale price of the main raw materials – oil and gas. Now, however, rather as in the style of Gordon Brown's tax changes, it is the Government which is becoming an active agent in the imposition of ever-higher costs on the consumer.

As part of an EU directive designed to combat climate change, Britain is committed to generating 20 per cent of its energy by 2020 through "renewables" – a tenfold increase in the current figure. Yet even the prevailing historically high prices of oil and gas provide domestic heating at between a half and a fifth of the cost of similar amounts of energy from renewables.

By chance, I spoke about this last week to the head of E.ON UK, the British arm of Europe's biggest supplier of wind power. Paul Golby explained to me that, because it was very hard to envisage much of a contribution from renewables for energy used by transport , this means that we would need to generate about 45 per cent of our domestic electricity bills from such sources - principally wind power – in order to conform with the EU directive known as the Renewables Obligation.

According to Mr Golby, meeting such a commitment will involve an increase in electricity generating costs of about £10bn per year; this is equivalent to almost £400 per household – or, in the roughest terms, an increase of about 40 per cent in annual electricity bills. Try selling that to the British public; and, of course, the Government hasn't.

As Mr Golby told me, with understandably diplomatic understatement: "The politicians have not been entirely honest about the cost of our renewables commitment, and so the public don't really know what's coming their way."

I told Mr Golby that I thought he was being somewhat naive if he genuinely expected any government to volunteer to the public that it was responsible for a swingeing increase in energy bills, especially if it thought it could get away with blaming the increase on anyone else – such as Mr Golby and his colleagues.

So far, the likes of E.ON – perhaps because they also stand to make what amount to large heavily-subsidised revenues from wind-power – have been very careful not to blame the Government. I forecast that this gentlemanly conduct will not last. Soon each side will be blaming the other, in a desperate attempt to avoid the full force of the public's anger.

The British public might become even more furious when it learns that one reason for the extra cost of wind power is that its inherent variability means that we will still need to retain our entire existing network of conventional power stations as back-up. That is because it is not a good idea for us to endure what happened two months ago in Texas, America's biggest wind-power producing state: a sudden drop in wind combined with a fall in temperatures led to what was described as "an electric emergency" – customers in west Texas were deprived of power for 90 minutes.

One thing is clear; the British public does need educating about this: even one of The Independent's most intelligent commentators wrote here last week that "The mini-windmill on David Cameron's new house is an economical way for an individual household to generate electricity, even contribute to the national grid". Well, that's if you consider it economical to spend thousands of pounds on a roof-top turbine that produces – even according to its supporters – no more than 1 megawatt hour per year, worth £40 unsubsidised on the wholesale electricity market. As a contribution to reducing CO2 emissions it's about as cost-effective and meaningful as cycling to the House of Commons while having your chauffeur-driven car follow you with your briefcase, suit and black lace-up shoes.

If a serious economic downturn does hit this country, then such extravagant gestures, far from attracting praise, might begin to seem Nero-like in their irrelevance to an economy threatened by the flames of recession. Some Ipsos-Mori polling data published last week by the Financial Times showed that over the 12 months to January 2008, the proportion of those in Britain declaring "the environment" to be their biggest concern fell from almost 20 per cent to just 8 per cent.

On a more long-term sweep, it was fascinating – though perhaps not surprising – to see that concern about the environment rose and fell in direct inverse proportion to concern about the domestic economy.

The headline on the FT's article was: "Greens fear voters will turn selfish in difficult times". That's one way of looking at it; but I don't think any mainstream politician will risk calling the electorate "selfish" if the public rise up against a state-imposed increase of up to 40 per cent in the cost of their domestic electricity bills.

In fact, after his taxing experience of the past few weeks, I imagine that Gordon Brown will be wondering just how to get out of the Government's commitment to do exactly that, as part of the EU Renewables Obligation. He'll be in company, of course – the company of every other European leader. The only uncertainty is whether they'll admit it – even to each other, in private.

d.lawson@independent.co.uk

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