Consumers are paying too much for their energy because of “excessive” green taxes added to bills, a damning Government-commissioned report has found. Consumers will have paid well over £100 billion by 2030.
A series of “spectacularly bad” decisions by ministers have “unnecessarily burdened” households and businesses with higher green energy subsidies than necessary, according to Prof Dieter Helm, of Oxford University.
The cost of renewable energy – as well as gas, coal and oil – has fallen but the benefits have not been passed on because ministers locked the taxpayer into long-term contracts that overestimated those costs, Prof Helm found.
Green taxes will cost the average household almost £150 from next year, according to energy firms.
Prof Helm said this was “significantly higher than it needs to be” to meet the Government’s objectives of cutting down on the use of fossil fuels and promoting renewable energy.
He was asked to undertake the research after Theresa May, the Prime Minister, vowed to tackle “rip-off” bills. However, the industry expert placed the blame on the Government’s own policies.
“Significant institutional reform” should be brought in to reduce the Government’s role and allow the market to function efficiently, Prof Helm said.
His Cost of Energy Review said: “Each successive intervention layers on new costs and unintended consequences. It should be a central aim of Government to radically simplify the interventions, and to get Government back out of many of its current detailed roles.”
Green energy taxes, which were introduced as part of the 2008 Climate Change Act, have caused controversy ever since because some MPs regard them as “regressive”, penalising those who can least afford them.
There are also divisions over whether the levies are justified, particularly with respect to subsidies for wind farms, with opinion split over whether they are an unnecessary blight on the landscape.
In August the Office for Budget Responsibility warned that the cost of the subsidies would more than treble over the next five years, from £4.6 billion in 2015-16 to £13.5 billion in 2021-22.
The costs of “decarbonisation” account for around 20 per cent of typical electricity bills, according to the report. Consumers will have paid well over £100 billion by 2030, and Prof Helm says that “much more decarbonisation could have been achieved for less; costs should be lower, and they should be falling further”.