Household energy bills could be £600 higher because of the Government’s ‘dash for gas’ strategy, the Committee on Climate Change (CCC) has warned. But a focus on low carbon renewable energy would by comparison cost just an additional £100.
The CCC Report was published just hours ahead of Ed Davey’s announcement that fracking would get the go-ahead in the UK.
The Energy Secretary said: “Shale gas represents a promising new potential energy resource for the UK. It could contribute significantly to our energy security, reducing our reliance on imported gas, as we move to a low carbon economy.”
However, the CCC analysed the Government’s own statistics and concludes: “The implication of this analysis is that unabated gas-fired power generation (i.e. without Carbon Capture and Storage technology – CCS) will become increasingly expensive in a carbon- constrained world.
“Alternatively, if carbon were not to be constrained, there would be upward pressure on fuel prices in a resource-constrained world.
“Relying on unabated gas generation at the UK level would therefore exacerbate medium-term affordability and competitiveness concerns. At the global level this would increase risks of dangerous climate change.”
The report Energy prices and bills – impacts of meeting carbon budgets, assesses the impact of carbon budgets on energy bills and confirms that annual household energy bills could increase by £100 in 2020 to support development of low-carbon technologies.
Expected bill increases beyond this timeframe are likely to be limited. In contrast, continued reliance on unabated gas-fired generation carries the risk of electricity bills for the typical household being up to £600 higher than under a low-carbon power system over the next decades.
For commercial and industrial users, bills are likely to rise by around 20-25% from 2011 to 2020 due to low-carbon policies. However energy costs represent only a very small share of total costs in these sectors (i.e. less than 0.5% of costs in the commercial sector and around 3% of costs in the industrial sector).
The impact on consumers will therefore be very small (approximately one penny to every £10 spent in the commercial sector, and six pence to every £10 spent on manufactured goods).
The report considers the impact of meeting carbon budgets on household, commercial and industrial sector energy bills, and concludes that it is economically sensible to insure against future high prices by investing in a portfolio of low-carbon technologies over the next two decades.
It says there are opportunities to improve energy efficiency could offset at least part of the impact on commercial and industrial firms and all of the impact on households, but stronger policies will be required if this potential is to be realised.
Lord Deben, Chairman of the CCC said: “Our analysis confirms the benefits of adopting a strategy which invests in low-carbon technologies. This provides a portfolio of energy sources as insurance against the risk of high gas prices. It lessens the impact on household bills in the long term and enhances the competitiveness of UK industry.”
The report says that the primary causes of energy bill increases since 2004 have been an increase in the international price of gas and investment in electricity/gas networks (e.g. accounting for 62% and 16% respectively of the increase in the typical household bill).
Whilst low-carbon policies and support for energy efficiency improvement have had an impact, this remains small by comparison (e.g. each accounting for less than10% of the increase in household bills from 2004-11) – and energy efficiency policies have had affordability and fuel poverty benefits.