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Thursday, August 06, 2009

Turn the air con down

The Department of Energy and Climate Change has produced an Impact Assessment for the Government's 'Renewable Energy Strategy' - in other words, its plans for meeting EU targets for renewable energy. It it rather serious stuff. The plans will cost £4.2bn a year ,with annual benefits of £0.3bn a year. The cumulative cost is estimated at £60bn over 20 years, while the value of carbon saved is estimated at £5bn.

While these large figures might seem pretty abstract to many, the following will not. A significant proportion of the cost will be passed on to consumers, with the Government estimating that domestic electricity prices will increase by 15 percent and gas prices by 23 percent by 2020. This equates to average increases of £75 and £172 to electricity and gas bills.

Besides the cost, the UK’s share of the EU target of producing 20 percent of energy from renewables by 2020, a national target of 15 percent, is widely regarded as 'ambitious' and by others as 'unrealistic'.

Those in the latter camp include the UK's Chief Scientific Advisor at the time the agreement was made (Tony Blair was in the hotseat for us). Sir David King said:
"I think there was some degree of confusion at the heads of states meeting dealing with this. If they had said 20% renewables on the electricity grids across the European Union by 2020, we would have had a realistic target but by saying 20% of all energy, I actually wonder whether that wasn't a mistake."
In a report last year we estimated that the EU's entire climate and energy package, of which the renewables target is only a part, will cost the UK £9bn a year and push an extra 1 million people into fuel poverty.

We're not arguing against an EU role in fighting climate change - a global challenge which the EU can contribute to solving with regional cooperation. We are, however, objecting to the EU's desire to micro-manage and continually centralise policy.

An EU-wide binding renewables target removes the UK’s flexibility to find the cheapest way of reducing emissions, which should be the overall aim. The cost is so high because the Government is now forced to 'pick winners' by subsidising the renewable technologies it thinks can achieve reduced emissions at the cheapest cost.

State bureaucrats do not have the ability to predict new advances in renewable technologies and their relative costs, which are at different stages of development and also depend on the fluctuating price of fossil fuels.

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