What have Renewables Ever Done For Us

I few weeks ago I drafted an article defending renewables. It never saw the light of day but I thought I would publish it here.

As a fundamental basis for our economic prosperity, the provision and price of energy is of vital importance. Energy price increases are never good news and will always attract debate, but the focus should be on the long-term. Trying to save a bit of money now only to be faced with much steeper increases in future is not what anyone wants but when we talk about reducing or removing renewable subsidies, in reality that is the direction in which where we are heading. That is why the Chancellor, quite rightly, is expected to maintain the current level of subsidy support under the Renewables Obligation (“RO”) regime when he presents his Autumn Statement. But what is it that we are actually paying for? The media, politicians and energy companies have spent a lot of time in recent weeks debating so-called ‘green levies’, and the use of such broad brush terminology has only served to confuse and cloud the issue.

The impact of green levies on your household costs is currently limited to around £120 per year, or about 10%, of the typical annual gas and electricity bill.  

Some commentators would have us believe that this all supports investment in renewables, particularly wind. That is simply not true.  

When you look at the cost of green levies the biggest single component – at nearly half the total, and possibly doubling next year – is ECO, an energy efficiency scheme.

If politicians want to deliver a meaningful and immediate reduction in energy bills, this is the area to focus on, as the scheme, despite its benefits, is placing too much burden on bill payers.

Another contributor to bills is the carbon floor price. Let's be clear: this is a tax, raising significant sums for the Treasury. It is probably adding only around £5 to your energy bills now, but that could quadruple in the next two years.

The Renewables Obligation scheme accounts for only £29 per household per year. It represents less than one quarter of the total cost of these Government schemes,and less than 3% of the typical energy bill.

This £29 has grown only modestly over the past 11 years, and is set to continue this modest rate of growth over the coming years. Onshore wind – contrary to popular belief – accounts for just one quarter of the total RO cost, so less than 1%of the total gas and electricity bill. Of all the schemes in place, the RO easily delivers the greatest value to the UK. It supports clean, affordable, domestically generated power. It is efficient in that it only provides support when electricity is actually produced and is a valuable driverof job creation.

By the end of 2013, renewable output will exceed 50 Terra watt hours for the first time. At nearly one sixth of total UK power demand, this output  is the equivalent of 7 new CCGTs, which would require an additional 1.7 billion therms of gas imported annually from Russia, the Middle East or Norway. One alternative would be to run our coal stations harder.  This would drive carbon emissions up by around 40 million tonnes and, more importantly, is an unrealistic possibility because the upgrades required for these ageing power stations have already forced several closures, with more to come in the next year or so.

The renewable industry is also serving as a catalyst for regeneration in manufacturing centres such as Humberside, Tyneside and Glasgow. It has contributed significantly to the development of both our energy infrastructure and the economy. It directly employs around 110,000 people in the UK and supports a further 160,000 jobs in its supply chain. It has stimulated academic teaching and research, with at least 12 universities offering renewables-related courses. And the industry has reached a level of maturity now where it offers a valuable source of income for our pensions and savings schemes. 

At £29 per household per year this represents exceptional value. This is £29 that is helping to diversify our energy mix and keep our energy supply secure. It is £29 that  is helping to reduce the impact of wholesale energy prices on consumers and lower our country’s carbon emissions.

We cannot influence wholesale gas prices - the primary reason for rising bills - but we can gradually become less reliant on gas and therefore protect ourselves from increases in bills that will be even less tolerable than they are currently. Renewables can and will rise to this challenge.

The government’s duty is to plan for the long-term prosperity of this country and that means continuing to invest in renewable energy, when the easy thing to do for short-term gain would be to stop. This is the time to keep the faith and invest in an industry that will help protect us from an otherwise inevitable future of rising bills.