Steve Cooke

measuring the boundaries of our nation by the sun

Reducing energy bills: why cutting green taxes & freezing energy bills are bad ideas

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WindmillConservative and Labour policies on reducing energy bills are short-sighted and self-defeating.

Green taxes make up roughly 9% of the cost of energy bills. Wholesale prices that the energy suppliers pay for gas and electricity comprise 47%. A large part of the price rises we’ve seen in our bills has been because the UK is running out of its own gas and has increasingly had to import it. As a result, gas prices have risen 240% over the last 10 years. 20% of our energy bills also comes from network costs – the cost of upgrading, maintaining, and supplying our energy, partly to cope with diversified energy supplies.

The Conservatives are making lots of noise about lowering energy bills by scrapping green taxes. A consequence of this policy is that the development of alternatives to fossil fuels (you know, the very thing that’s responsible for 47% of our bills) will be slowed. Wouldn’t it make more sense to work on reducing the cost of energy supply? Wouldn’t the best the way to do that be to reduce our reliance upon diminishing supplies of a finite resource that we are forced to import? The Tory plan leaves us more reliant upon fossil fuels and so sees our bills rise in the long term. Also, our planet gets screwed in the process.

Meanwhile, Labour’s policy is to freeze energy bills for 20 months in 2015 also looks like a terrible idea. The big six energy companies are currently making around 7% profit. Labour’s policy will see energy companies hiking their prices up just before a price freeze, and again straight away after it. Meanwhile, because wholesale costs will continue to rise in the freeze period, energy companies will find their margins narrowing. The big six companies will likely be able to ride out those cost increases, but smaller companies will struggle. The likely outcome is that improvements to our networks will be stalled and that the big companies will come out with a bigger monopoly on supply. That means green energy production is stalled and there’s less competition in the market. Once again, the consumer and planet get screwed.

The solution to rising energy bills is to reduce consumption and reduce reliance upon fossil fuels. It is not to scrap green taxes and freeze energy bills. Each of these solutions is self-defeating and merely shifts problems onto the following government (perhaps this is why the two big parties are keen on them).


For the figures used in this post see:

http://www.theccc.org.uk/wp-content/uploads/2012/12/1672_CCC_Energy-Bills_bookmarked.pdf

http://www.carbonbrief.org/blog/2013/10/wholesale-energy-and-the-network-grid-the-parts-of-our-energy-bill-politicians-cant-control/

http://fullfact.org/factchecks/energy_generation_profits-29248

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Author: Steve Cooke

I work in normative ethics, specialising in animal and environmental ethics and political philosophy.

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