By Paul Homewood
In June 2011, 18 months before going off to serve Her Majesty in another capacity, former energy and climate change secretary Chris Huhne made a remarkable speech in which he asserted that the Government’s green policies, far from costing households, would actually save us money. “Green growth,” he said, can protect the economy by “reducing our exposure to price shocks”. Moreover, the cost of low carbon policies up to 2020 would amount to “just one per cent on the average household energy bill” – and even that assumed that we could always buy oil at “last year’s cheap rate of $80 a barrel”. If, as he expected, oil prices stayed high and gas prices rose to meet them “then our consumers will be winning hands down from our energy policy”.
To be fair to Huhne, he was not the only minister to hold this conceit. It has been a received wisdom among many in government, opposition and in the great green blob that switching from fossil fuels to renewable energy would make us better off. How laughable that claim seems now.
We have had the green energy revolution which Huhne advocated. Last year the Government claimed that for the first time more of our electricity was generated by renewables than by fossil fuels (although only if you count as “renewable” the filthy practice of burning wood chips to generate electricity – an industry which Huhne himself went off to promote post-prison). Coal-fired power stations which in 2011 were still generating 31 percent of our power are now down to 2.1 percent, and will be gone for good by 2024.
But where is the green dividend? Adjusted for inflation, average household electricity bills rose by 19 percent between 2011 and 2020 – from £451 to £571 per year at 2010 prices. But that is just for starters. Far from being protected against price shocks in global energy markets, consumers are looking at their bills possibly doubling in April when the Government’s price cap is revised upwards.
As for the claim that green polices would only add one percent to our energy bills, Ofgem calculates that 25 percent of our electricity bills are now made up of social and environmental levies – ie subsidies for green energy as well as insulation schemes for low income households. We pay a further 2.5 percent on our gas bills.
It is true that the current energy crisis is a global phenomenon precipitated by rising demand from a rebounding global economy. But in Britain it has been made much worse by energy policies which for a decade and a half have doggedly pursued the objective of cutting carbon emissions without any regard to the costs. For years, Conservatives, Labour and the Lib Dems have all attempted to blame rising energy prices on greedy, profiteering energy companies. It never was true – deregulated gas and electricity markets have always run on tight margins – but with dozens of energy suppliers having gone bust in recent months it is an argument that has become impossible to sustain. Neither can you blame fossil fuel markets for rising bills – a barrel of crude oil costs less now than it did when Huhne made his speech, even before adjusting for consumer inflation.
We are paying more than we need be for our energy because the Government has loaded fossil fuels with carbon levies, switched electricity generation to much more expensive renewables, and deprived Britain of what could have been by now a very productive native shale gas industry. The government folded in the face of environmentalists who were determined to squash the nascent industry by ramping up fears of ‘earthquakes’ – or rather minor tremors, most of which cannot even be sensed by humans on the Earth’s surface.
Traditional oil and gas extraction, too, is being deterred by subjecting listed companies to punitive decarbonisation targets. Shell, which should have been developing the Cambo field off the Shetlands, has been driven to pursue other avenues, like providing my broadband. The result is that we are becoming ever more dependent on imported gas – shipping in refrigerated shale gas from Qatar that we could have been producing ourselves. The trouble is that in recent months energy-hungry China has been outbidding us for it, driving up prices.
Ministers love to point out that the unit cost of generating electricity from wind and solar has fallen over the past decade, but that ignores the intermittency problem. Consumers are having to pay through the nose to fire up dormant gas and coal plants to provide power at times when, as in recent weeks, the sun hasn’t been shining and the wind hasn’t been blowing. At one point in November, energy suppliers were forced to stump up £2000 per MWh for electricity – around 40 times the usual wholesale price.
Conversely, when the wind does blow we are forced to shell out to compensate wind farm-owners ordered to turn their turbines off – last year we collectively paid £282 million in so-called ‘constraint payments’ when the national grid was unable to absorb all the electricity they were producing.
We are in this position because we have built more and more wind and solar farms without properly addressing the issue of energy storage. The Government set up so-called “capacity auctions” in 2014 to try to create a market for energy storage by offering subsidies to anyone who can supply large amounts of energy at short notice. But the lucky winners have tended to be owners of gas and coal plants, with just a handful of battery installations.
Why? Because storing energy is horribly expensive. The Pacific Northwest National Laboratory in the US puts the “levelised’ cost of storing energy in large lithium battery installations (that is taking into account capital investment and running costs over the lifetime of an installation) at $336 (£260) per MWh. That is five times as much as the usual wholesale price of electricity – and we have to pay it on top on the cost of generating electricity in the first place. There are times in winter when our wind turbines and solar panels produce next to no power for days on end, yet we only have enough storage capacity to meet 38 minutes’ worth of national electricity demand.
Where is the opposition? All that Keir Starmer, Ed Davey and Nicola Sturgeon are offering are even more expensive energy policies
But if consumers are heading for an energy shock in April when price caps are raised it is nothing compared with what is coming later. In 2026 installations of new oil boilers will be banned, followed in 2035 by new gas boilers. From then on, the only practical way to heat most homes will be in the form of electric heat pumps, which cost £10,000 a time, are more expensive to run than gas and which won’t succeed in keeping many older, less-well insulated homes warm.
Motorists, too, will be prohibited from buying new petrol and diesel cars from 2030 – forced to buy electric vehicles which currently cost around half as much again. Forget the spin that they will be on a parity with petrol and diesel cars by 2024 – that’s just another piece of Huhne-style optimism. Surging prices of rare metals needed for their batteries have already led to one Chinese manufacturer jacking up the price of electric vehicles by 20 percent this month.
With living costs creeping up on all fronts, there could not be a worse time to jack up taxes. In April, just as higher energy bills are landing on our doormats, National Insurance rates will rise by 1.5 percent. Labour did at least oppose that, but otherwise where is the opposition? All that Keir Starmer, Ed Davey and Nicola Sturgeon are offering are even more expensive energy policies. Ever desperate to make herself look more “progressive” than Westminster, Sturgeon has committed to cutting emissions by 75 percent on 1990 levels by 2030 – a target which could only be met by a massive replacement of existing domestic heating systems.
How bizarre that politicians who on one day will lecturing us on poverty, and energy poverty in particular, and on the next day will be proposing to drive up household bills to reach carbon reduction targets. The only way they can try to square this impossible circle is to pretend, like Chris Huhne did, that reaching zero carbon will actually save us money. Or by trying to dismiss the issue of cost by claiming that climate change is so serious it will kill us all unless we eliminate all carbon emissions by 2050 sharp.
Sorry, but no. As most people will correctly work out for themselves when they receive their inflated energy bills this spring, the biggest danger they face is not being fried or drowned in a slightly warmer world – it is succumbing to hypothermia because they cannot afford to heat their homes.