Press release from the Renewable Energy Foundation

A new House of Commons report released this week brings the vast cost and inefficiency of Government Renewables policy into sharp focus and shows that climate change policies already add substantially to the average domestic electricity bill – a figure that is set to rise sharply.

• Climate change policies make up around 14% of the average domestic electricity bill and 3% of the average domestic gas bill.
• Climate change policies also make up 21% of the average business electricity bill and 4% of the average business gas bill (i).
• By 2020 the burden of green policies will have risen to 18% of the average domestic electricity bill and 55% of the average business electricity bill(ii).
• Despite this substantial bill the Renewables Obligation will decrease emissions by just 1.6% by 2010, at an exorbitant subsidy cost of around £400 per tonne of carbon (iii).

(i)-Figures from BERR, UK Renewable Energy Strategy: Consultation: June 2008, para 10.5.3, p. 231.)

(ii)-BERR, UK Renewable Energy Strategy: Consultation: June 2008, para 10.5.7, p. 232.)

(iii)-"Reform of the Renewables Obligation 2006: Ofgem's response", doc. ref. 11/07, issued 22.01.07

The Business and Enterprise Committee yesterday published its report Energy Prices, Fuel Poverty and Ofgem.

REF believes that while this is an important and in many ways valuable study the report tends to suggest that Government is not fundamentally to blame for the growing energy crisis, particularly dependency on imported gas, early warning signs of which are now appearing in sharply rising electricity prices, increases that have a major knock-on effect in practically every sector of the economy from the supermarket checkouts to water bills.

However, REF concludes that Government neglect and preoccupation with eye-catching climate change initiatives that deliver very little, has both added to the burden on consumers and distorted patterns of investment in the electricity generation sector meaning that a second even more frantic "Dash for Gas", and very high prices in the short and medium term are now inevitable.

Unfortunately, these very high costs are matched with saving only small quantities of emissions and so provide a poor advertisement of the low carbon economy.

Ofgem in 2007 was already calling for the abolition of the RO since it provides excess subsidy and poor value for money for the UK.

However, rising fuel costs and the increased costs of the climate change policy do add significantly to the Treasury funds, through VAT.

VAT is charged on the Climate Change Levy, the approximately £1bn a year cost of the Renewables Obligation, and on the increases in electricity prices caused by the EU Emissions Trading Scheme.

Campbell Dunford, REF's Chief Executive, said:

"Of course we need further liberalisation in the European energy markets, and more gas storage, as the BERR Committee report suggests, but the facts of the matter are that wasteful and ineffective renewables and climate change policy is responsible for a large part of the sharp rises we are seeing in consumer bills, and that VAT on these rises is actually increasing Treasury revenue.”

“If the Prime Minister really cares about fuel poverty and the competitive nature of UK industry perhaps he will now waive VAT on increases caused by climate change policy, and take steps to ensure that these very costly subsidies actually yield value for money."

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For further information please contact Margareta Stanley on 020 7930 3636 or 07968 049 832, email This e-mail address is being protected from spam bots, you need JavaScript enabled to view it or visit our website www.ref.org.uk