The Ever Rising Cost Of The Climate Change Act

In March this year, the Committee on Climate Change published their latest review of the impact on energy prices of government climate policies:

https://www.theccc.org.uk/publication/energy-prices-and-bills-report-2017/

I cannot recall it making many headlines at the time, but, as Joe points out, it makes for interesting reading.

The key chart is this one:

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By 2030, climate policies will be adding 6 pence per kWh to residential electricity bills, in addition to a small amount added to gas bills. This equates to 28% of electricity bills by then.

Average annual electricity usage is about 4,000 KWh per household, meaning an extra cost of £240.

It is worse than that, however, because government policy is to “encourage” people to electrify heating. Since gas is already a much cheaper option at about 4.6 per KWh, the impact of higher electricity prices on energy bills will be significant.

The CCC has not included the cost of smart meters in their calculations either, though in theory these should be covered by 2020 or soon after. Whilst it makes allowance for extra costs of intermittency, it also factors in what is called “the merit order effect”. This assumes that wholesale prices will fall because of the inroad of low-marginal cost renewables.

Similar costs will also be loaded onto non-domestic users, ie commercial, manufacturing, transport, and public sector. The only slight exception will be those large manufacturing companies who qualify for compensation to offset carbon pricing.

Residential demand accounts for about 35% of total electricity, which last year was 304 TWh. However, electricity demand is forecast to increase to around 379 TWh by 2030. Based on this figure, the 6 pence per kWh will mean that the cost of climate policies by then will be a horrifying £22.7bn a year, (all at current prices).

CCC also assumes that wholesale electricity prices will steadily increase between now and 2030, predicated on substantially rising gas prices. (Again, this is at 2016 prices).

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Why is this important? Because the higher the wholesale price, the lower the apparent subsidy to renewable energy is.

The report shows the sensitivities. Based on the arguably more realistic Low Gas price curve, the cost of climate policies would increase by a further £2462 million.

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Added to the £22.7bn, this would leave us with a bill of £25.2bn. To put this into perspective, it would amount to about £900 per household.

Energy Savings

Inevitably the CCC has tried to spin this by claiming that these increased prices would be offset by savings in energy consumption.

This ignores four factors:

1) Many energy saving devices and systems actually cost money in the first place.

More efficient light bulbs, for instance, are much more expensive than the traditional sort. Whether or not they actually save money in the long run, you simply cannot claim the energy savings without offsetting against the higher purchase price.

The same applies to insulation and many other examples.

2) The government is trying to claim credit for advances in product technology which may have happened anyway.

Cars nowadays probably give twice the mpg of those from thirty or so years ago. This has not happened because of government diktat, but because of the natural operation of the free market.

The same applies to many products.

What the government, together with their hired help, the CCC, are trying to do is take away from households the benefits of better technology, by using them to pay for climate policies.

3) Residential solar panels reduce domestic electricity consumption figures, as measured by the government. But, of course, solar panels also cost a lot of money, and may also subsidize via RHI schemes, which are funded by the taxpayer.

4) It is also undoubtedly true that reduced energy consumption has been the result of higher prices. The biggest fall in domestic electricity took place between 2005 and 2011, a time when prices were rising rapidly and incomes falling.

Since 2014 there has been virtually no reduction at all. There is little indication that further large savings can be sustained into the future.

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Comments (12)

  • Avatar

    Amber

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    As a further example of the absurdity and ineffectiveness of the Carbon Tax “price signal “in deregulated energy markets .
    the commodity cost of natural gas from a regulated utility in British Columbia is $2.05 and the carbon tax is $1.48 or 70% of the
    commodity . Very soon the carbon tax will be greater than the
    commodity it is levied on .
    When the carbon tax was forced on people by the Liberal government the commodity price of natural gas was $10.00 .
    The fact the commodity cost is now 20 % of what it was in
    2008 and even with the carbon tax added the combined cost is still only 35 % of what it was ten years ago . So the “price signal ” narrative is lost in deregulated markets and all that has been achieved is making poorer people poorer ,another tax to hollowing the middle class and screwing the businesses that happen to remain . The Liberal Party of Canada wants to impose the same
    crap on the entire nation while green washing a massive tax .
    At least President Trump has called BS on this overblown fraud .

    Reply

    • Avatar

      Sonnyhill

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      Converted liters to US gallons and converted the currency, came up with US $5.60 / gallon for gasoline in the UK. That’s what the Democrats are aiming for.

      Reply

  • Avatar

    Spurwing Plover

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    Whats become of all the Global Cooling and the New Ice Age we were suppost to have in the 1970’s? Its just like the Killer Bees from Africa and Radon Gas what ever happened with all this other poppycock we were hearing so much about in the 1970’s and 80’s and all this Malarkey WE HAVE ONLY TEN(10)YEARS LEFT TO SAVE THE PLANET back in the 70’s as well or cities under domes,gas masks and coast with dead fish and the other poppycock we were hearing about back when those wackos got together and celebrated Earthday

    Reply

    • Avatar

      JayPeeIdiot

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      The ice age meme has been debunked so often, you would have to have neen deliberately ill informed to have missed it. BTW, did you know that last month was the warmest non El Nino month in recorded history? Or that 2017 looks to be the hottest non El Nino year in recorded history?
      Of course not, because you need to be informed to know that.

      Reply

  • Avatar

    Spurwing Plover

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    i want to see all these anti fracking/keep it in the ground fools to have to pay real high elecrtic bills so maybe they’ll change their inds about all this Green Malarkey they have been fed to by the Greens and certian Hollywood hypotcrits and a certian little airhead from Tennesee

    Reply

  • Avatar

    G

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    Amber has it right. Absurdity.

    For decades liberals have believed (or at least professed) that we can tax and regulate ourselves into prosperity. It goes against all rational models of economics, yet the left continues the fantasy, hoping to validate socialism despite its abject failure to-date.

    As Amber illustrates, the goal is to hollow out the middle class and then divide the “entitled” poor against the “villain” wealthy, turning the people against themselves; classic Marxism.

    Reply

    • Avatar

      Sonnyhill

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      BillDuh and Idiot jpDrewski insist they’re just trying to keep the temperature down. Right.

      Reply

      • Avatar

        G

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        Oh yes!… They’re only concerned about “saving the planet”… They could care less about politics…

        The Climate Agenda is just a surrogate for the Social Justice agenda, and the Social Justice agenda is nothing but a surrogate for Socialism. I’d at least have some respect if they would proclaim their true motives up front and open an HONEST debate of liberty and free market economics verses authoritarianism and socialism. But that’s not how Comrade Marx drew up the plans, so don’t hold your breath.

        Reply

        • Avatar

          Sonnyhill

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          Please explain how humans will climb over each other grasping for power and riches, then “reveal” themselves as socialists.
          Guilt? Or maybe now that they’re set for life, they want some love?

          Reply

          • Avatar

            G

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            That’s a good question Sonny. I think most socialists believe THEY will somehow be exempt from the hardships they would place on the rest of us. After all, they’re the “fellas with compassion and vision”.

  • Avatar

    Spurwing Plover

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    Like those idiots renaming Columbus Day as Indigionous Peoples Day and with Thanksgiving next month what will these PC Turkeys be doing behind acting like idiots

    Reply

  • Avatar

    Spurwing Plover

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    The eco-wackos upset becuase Trump rejected having the Pacific Walrus listed under the ESA too bad liberals now what dont you just skiddle on home before mommy finds your missing from the basement

    Reply

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