climate change energy

Gas vs Renewable energy – your bill in 2020

Yesterday the government finally gave the go-ahead to gas fracking in Britain, after a pause to assess its impact. It was expected, given that the Treasury was drawing up incentives to encourage it at the same time as the DECC was deciding whether it was safe or not. Most of yesterday’s headlines went to the fracking decision, but the government’s Committee on Climate Change had some news of their own. Their latest research compares a renewable energy strategy with a new push for gas, and examines the consequences for household bills.

The result? Pursuing renewable energy could add £100 to the average household annual bill by 2020 and little more thereafter. Locking ourselves into a gas future would add at least £200 and possibly as much as £600 to the average bill by 2050.

This is important stuff, because we’re busy putting in the place the second option, planning new gas power stations and pinning our hopes on fracking, while dismissing renewable energy as unaffordable and uneconomic. In the process, we’re burying any hope of meeting our carbon targets.

The slagging off of renewable energy in the tabloid media is perhaps understandable. What’s more bizarre is the politicians who are set against renewable energy – the Climate Change Committee are using the government’s own research, so they’re ignoring their own advisors. It’s also bizarre to hear people who object to wind turbines because they ‘wreck the countryside’ cheerleading for gas fracking – will gas fracking rigs not impact the landscape?

The most important point, ultimately, is the need for joined up thinking. I suspect that the dismissal of renewable energy is motivated by climate change skepticism, but that’s only one reason for decarbonising our energy grid. The other big reason is resource depletion and the rising price of gas. Renewable energy isn’t just an environmental issue, it’s an energy security matter too.

Here’s a breakdown of the energy price rises between 2004 and 2011. Support for renewable energy added £30 to the bill. Supplier profits and the increase in wholesale gas prices added £300. Is it really too late to revisit that gas strategy?

average-bill-04-11

16 comments

  1. Very good post indeed. It would be interesting to breakdown the three components in the graph: wholesale, supplier costs and margins…because it is not giving us much needed information…You mention renewables, can you point me out to some link or info on renewables and viability? My understanding is that renewables will not give us the necessary energy needed and at the moment they are not cost effective (at least until oil prices go up),,,

    1. My supplier does give a profit figure – they claim its 5%. “renewables will not give us the necessary energy needed and at the moment they are not cost effective”. Lets break that down into its component parts. On the required energy yes and no. In principle replacing our current electricity supply with renewable sources is not too difficult. (Whether this is desirable w/o extensive conservation is a moot point). I wouldn’t say easy but there are whole basket of renewables and the thing is to use them all. Renewable heat is far more tricky because the technologies tend to be low temperature systems that are much more disruptive to retrofit. Also these systems mainly use electricity. This and electrifying all road and rail transport will raise electricity demand making the first point far more challenging. Oil for flying is not replaceable nor is much of the plastics and material goods we use.

      1. I thought lumping those three things together was rather broad too. Ofgem says that 9% of your the average household bill is profit, operating costs are 10% and gas costs account for 45%. More on that here:
        http://makewealthhistory.org/2011/10/18/why-our-energy-bills-are-so-high/

        Replacing our entire energy system with renewable energy won’t be easy, but it is possible, especially if we radically reduce our energy consumption first through efficiency measures, tighter building codes and so on. They are more expensive than (most) other forms of generation at the moment. The thing to remember is that the cost of renewable energy is falling, and the price of gas is rising. They will eventually cross over, and wind and tidal power will be the cheaper option.

        I’m not sure of single one-stop link I can give you for information on renewable energy, but Sustainable Energy Without the Hot Air is quite useful: http://www.withouthotair.com/

  2. You ask – ‘Is it really too late to revisit that gas strategy?’
    That answer is surely No. Isn’t the real question ‘Where does the will to revisit come from?’ – the internet force?

    With my lack of knowledge in mind, I can only assume something as basic as that renewables would not make the GDP rise to the same degree as gas (for a short period), so the governments do not hear what is said by their own advisors? Do you, or others have suggestions?

    1. A renewable energy revolution would be great for GDP – it’s one of the recommendations from the Green New Deal folks. I think, as I said in the post, that people think that renewable energy is a climate change matter. They don’t believe that climate change is a problem, so they don’t believe that renewable energy is important. I think they’ve only got half the point. There’s a much stronger lobby for fossil fuels than for renewable energy.

  3. 2 points. The minor first one is that gas fracking rigs do not ‘wreck the countryside’ in the same way wind turbines do. The rig is only there during drilling (a few months at most) then all is needed is a low rise building at the well heads. Compare that to a 100 metre high turbine that will be there for 20+ years. Turbines have a much greater and longer lasting visual impact.

    The other major point is it is wrong to compare, as you do, the £100 per year that renewable energy will add the to the average household annual bill with £600 that gas will add, since the £100 figure is for the bill in 2020, the £600 figure is for 2050. 30 years is a big difference. Either you don’t understand the figures or you are twisting them to suit your narrative.

    The IEA figures on which these gas prices are based are very conservative about the likely exploitation of shale gas in Europe. Until shale gas production is widespread in Europe they will not include much of it in their figures. Of course high gas prices may well encourage Europe to drill later. In that case it would be expected that since exploitable UK shale gas reserves are likely to be similar in size to the North Sea gas fields we would see a downward pressure on prices. Osborne basically spent the autumn statement torpedoing the assumptions this report was based on.

    Our gas prices are volatile, which means they can go up and DOWN. I notice that the DECC report baseline gas price is 2004. Could that be because that was a 40 year low in real terms gas prices? After that up is the only way really they can go.

  4. The line I’m always getting here is ‘industrialising the countryside’. Shale gas would be industrialising the countryside.

    It’s not my comparison, it’s the Committee on Climate Change. Here are the bullet points from the report and you can decide for yourself if I’m twisting anything:

    – Our analysis suggests that support for low-carbon technologies will increase annual
    energy bills by around £100 by 2020 (a 10% increase on the 2011 bill) for an average ‘dualfuel’ household (i.e. for the 86% of households that use gas for heating and electricity for lights and appliances).
    – Projected bill increases to 2020 are consistent with our previous estimates of the costs
    of meeting carbon budgets (i.e. less than 1% of GDP in 2020).
    – Beyond 2020, we project limited bill increases across residential, commercial and industrial consumers to support low-carbon investment.
    – In an alternative scenario with investment focused on unabated gas-fired generation,
    there is a risk of much higher cost increases in the long term (e.g. the average annual
    household bill in a gas-based system could be as much as £600 higher in 2050 than in
    a low-carbon system if gas and carbon prices turn out to be high).

    1. You wrote “Pursuing renewable energy will add £100 to the average household annual bill by 2020. Locking ourselves into a gas future however, will add £600 to the average bill.”

      You made no reference to the 2050 date for the £600 figure, only including the 2020 one, so an unbiased reader would think the two figures were for the same time period. So inadvertently or not, your post does twist the report.

      The report also made clear the £100 figure for renewabes is their mid range figure, the £600 one from high range figures so they aren’t really comparing apples with apples, but then they make that clear, you don’t.

      So you are twisting the report. Are you going to change the post to remove the false impression it gives?

      1. I’m summarising the report in two sentences, so it’s not going to have every detail. I’ve linked to the original so you can check it for yourself.

        I have no desire to deceive, and I’ve amended the post as you suggest.

    1. Not necessarily. There’s no reason to think that renewable energy can’t be profitable. In fact, as the price of gas rises, energy companies that have a better mix of renewable energy in their supply may find themselves able to offer cheaper prices than those dependent on gas – though not any time soon!

      There may be other things that would impact profits, but not renewable energy in itself.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.