Switching to green power could add £29 billion a year to household bills

APRIL 22, 2024

By Paul Homewood

h/t Paul Kolk

Even Emma Gatten has to admit the truth!

Switching togreen powercould add £29 billion a year to household bills, analysis suggests.

And the net zero investment could see the poorest households £700 worse-off, according to the Resolution Foundation analysis.

Cheap green energy for homes and electric cars has been promised on the basis of low interest rates to pay for the upfront investments in renewables and grid expansion, the foundation said.

But the costs of borrowing have spiked since the energy crisis and could remain high,increasing costs for the net zero transition, which are paid through household bills.

If today’s higher rates of around nine per cent continue, it could add £29 billion a year to household energy bills in 2050, the foundation found.

That would be an average rise of £400 in 2050 compared to 2019, beforethe energy crisis. Energy bills would still be lower than 2023, because of recent price shocks.

The costs would hit poorer households disproportionately, mostly because they are less likely to benefit from lower transport costs through owning an electric vehicle.

The poorest fifth of households could face an increase of £700 compared to 2019 prices, a rise of 40 per cent.

“Interest rates could remain high and that could cause issues, both in terms of the pace of building things, but also the implications on household finances as well,” said Jonathan Marshall, senior economist at the Resolution Foundation.

Switching to green power for homes and cars to meet theUK’s net zero by 2050 targetis expected to require a four-fold increase in investment over the next decade to build new wind and solar farms, and expand the grid to account for electric cars and heat pumps.

The Government offersnew wind farmsa guaranteed price for their electricity, which has dropped from £164 per megawatt hour in 2014, to just £51 in 2022.

But last year, it failed to secure any new offshore wind projects after the industry said the prices it offered were too low, given rising costs of finance.

“Cleaner energy could be cheaper energy, if interest rates return to the low levels seen during the 2010s,” said Mr Marshall. “But we can’t count on that being the case.If interest rates stay high, energy costs will rise rather than fall in the years ahead.”

The report calls for the Government to focus on building the cheapest renewables, in particularonshore wind, to keep costs down.

It also says the Government should consider a social tariff to help the poorest households pay for energy costs in the future, and look at shifting some of the costs of the energy transition into general taxation rather than bills.

https://www.telegraph.co.uk/news/2024/04/22/switching-green-power-net-zero-onshire-wind-bills/

A few points:

1) Current interest rates are not “high”, as the report states. They are actually normal in historical terms.

They have been artificially low since 2008, thanks to QE, which has effectively operates as a subsidy to renewables, paid for by savers.

2) £29 billion works out at over £1000 a year per household, not the £700 claimed.

3) Gatten states “The costs would hit poorer households disproportionately, mostly because they are less likely to benefit from lower transport costs through owning an electric vehicle”

Has nobody told her that EVs are much more expensive to buy and run?

4) Onshore wind is not as cheap as claimed, because of its greater intermittency.

5) The report refers to wind/solar and grid upgrades. The figures therefore exclude the costs of all of the storage and back up capacity needed

6) Talk of social tariffs and transferring costs to general taxation is no more use than rearranging the deckchairs on the Titanic.

7) The figure of £29 billion of course only relates to the power supply.

On top of that can be added all of the other costs of Net Zero, including:

• EVs
• Heat Pumps
• Hydrogen
• Costs for industry of decarbonisation
• Insulation

It is not difficult to see a figure of at least £50 billion when everything is taken into account.