Prices could drop by a third if the coalition changes its costly policies
AT YESTERDAY’S energy price summit, David Cameron pledged that he would do whatever he could to bring down the spiralling cost of energy bills. There is only one problem: the coalition’s own costly green energy policies, which threaten to raise energy prices even further in coming years.
David Cameron’s energy advisers recently warned him of a 30 per cent rise in consumer energy bills by 2020 as a direct result of the coalition’s policies. A Deutsche Bank report last week said that a quarter of UK households would be driven into fuel poverty by 2015.
Britain’s industrial electricity prices are already among the highest of any major economy. One of the reasons: Britain has the most aggressive decarbonisation target in the world, a legally binding 80 per cent reduction of CO2 emissions by 2050. A unique and unilateral burden on our business sector and economy.
By obliging power companies to buy more expensive, renewable energy, our green levies have significantly inflated our power bills.
In response to a growing public backlash, George Osborne has promised that the government will not cut CO2 emissions faster than other countries in Europe.
But there is opposition to Osborne’s pledge. Chris Huhne, green campaigners and even energy bosses insist families will still be better off switching to renewable energy, claiming oil and gas price hikes are “inevitable”.
These assumptions are completely mistaken. In reality, we are in the middle of a shale gas revolution that has decoupled the prices of oil and gas and is reducing energy prices significantly in those countries that have begun to tap into this new and plentiful resource.
Britain may be sitting on a gold mine of cheap, abundant and comparatively clean energy that could supply the UK’s energy needs for a century. Three weeks ago, an estimated 200 trillion cubic feet of shale gas was discovered near Blackpool, suggesting Britain has far more shale gas than anyone expected.
Unlike green targets or costly subsidies, the shale revolution could create a new energy industry that would generate billions of much needed revenue and thousands of real jobs.
The knock-on effects of a shale gas revolution could be just as staggering: cheap energy would make UK manufacturing more competitive, gas and electricity bills would fall and the rising trend in fuel poverty could be reversed.
According to Deutsche Bank, the most effective policy to bring down energy costs would be to abandon the “renewables obligation” and the carbon floor price. This would cut bills by 15 per cent from 2015. I think another 15 per cent or more could be cut in this government’s lifetime if it encouraged the shale revolution.
Abandoning high-priced green energy programmes together with the exploration of cheap British shale gas would bring down energy costs, perhaps by as much as a third, and kick-start the UK economy. Given coalition constraints, it remains doubtful, at least for the time being, whether the “greenest government ever” is ready or indeed capable of grabbing a golden opportunity with both hands.
Dr Benny Peiser is the director of the Global Warming Policy Foundation.