The Great Energy Crisis
While the big six announce energy price rises of on average 9.1%, while Ofgem tell us wholesale prices of energy have only risen by 1.7% and MP’s call for an independent review into the energy industry, it seems we are all about to enter an energy crisis as the winter nights draw in.
With energy bills hitting the headlines due to their escalating costs and companies blaming wholesale price rises, infrastructure
improvements, government subsidies, renewable energy and energy efficiency improvement schemes, perhaps it’s time for us all to scrutinise the true costs of energy and what we are paying for. In 2012 the big six energy supply companies made £1189 million in profits collectively on domestic energy supplies, while the cost to the consumer continued to rise.
The average UK energy bill is £1,267, of which £58 goes to energy efficiency subsidies such as ECO to try and improve the coldest and most inefficient housing for the most vulnerable in our country. The removal of such subsidies will increase winter deaths due to cold homes. It is estimated 4.5 million households will face the choice of heating or eating and 1.3 extra tonnes of CO2 will be emitted per household due to poor insulation.
A further £37 per year from the average energy bill is due to subsidies relating to renewable energy technologies. It is widely acknowledged that for many reasons we need to start to fill the yawning energy gap. Whether the reason is security of supply by negating our reliance on foreign imports of fuel, expensive and reducing fossil fuel resources, retention of finance within local/national economies, climate change or all of these motives, we must find a solution. Part of that solution has to be renewable energy technologies and utilising our natural resources to generate clean energy to power our nation. Local renewable energy schemes can revitalise local economies and generate an income stream for local communities. As a nation it is obvious we are going to be paying for future energy supplies. As a community, this is something we could gain from if we are prepared to engage with it. The fossil fuel and nuclear industries have been in receipt of subsidies for many years and the energy companies blaming 3.2% of the average bill associated with renewable energy on their need to increase energy bills by in some cases over 10% is worrying and points to a short-sighted view of our energy future. Fossil fuels are costing us dearly, between 2004 and 2010 dual fuel bills rose by £455, of which £382 was due to soaring gas prices. Globally, subsidies for fossil fuels are $409 billion compared to $66 billion for renewable energy
At this time the nuclear debate generally raises its head above the parapet. Many believe that for a transition to a low carbon energy economy we must embrace some nuclear power and look to developing nuclear technologies for the future. However, it is important to realise the true cost of nuclear power and how it compares with other technologies. Currently, the annual government grant to the Nuclear Decommissioning Authority is £2.3 billion. Divide that by £26.3 million households and you find the average cost per household of dealing with nuclear waste is £87. Nuclear Power plants will be paid a guaranteed £92.50 per Megawatthour. Current incentives on large scale wind turbines is £46.20 per MWh, Solar PV incentives are between £71 - £103 per MWh dependant on system size and Biomass Heating £86 per MWh dropping to £22 per MWh. The renewable incentives are continually falling as the technology becomes more affordable, but, with decommissioning and the need for new, more efficient plants to be built, are the nuclear subsidies set to go the other way?
While the big six energy companies are bemoaning the increase in fuel costs, looking for subsidies and levies to be included in general taxation and hoping to maximise their profits through increased costs to the consumer, small energy companies and green energy companies are questioning the need for increases in household bills. Small energy companies, of which there are only a few of in the UK, do not recognise the claimed wholesale price rises blamed by the big six. Admittedly, if an energy company has less than 250,000 customers they do not have to contribute to ECO subsidies (4.2% of an average bill) and if a company sources all of its energy from renewable technologies, then it does not have to pay the European Trading Scheme or Carbon Price Floor levies (1% of an average bill). So,perhaps it’s time we started to look to small independent suppliers and those who are supplying energy from renewable sources to benefit from lower bills and lower emissions.
We have to realise that our energy costs will increase as we invest in new infrastructure, generating technologies and to improve the efficiency of our poor housing stock to improve our economic retention, national resilience and reduce our carbon emissions. However, this is what price increases should be spent on, not to maximise the profits of large international companies and such improvements to our energy structure should not be used as a scapegoat for other motives.