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Fuel Poverty: Britons Are Paying The Price For Green Energy Folly

Politicians beware: rising green energy prices via domestic charges is not a vote winner.

The Government has released the latest figures on fuel poverty, revealing that from 2008 to 2009 the number of fuel poor households in the UK (households which cannot afford to keep adequately warm at a reasonable cost) rose by one million, reaching a staggering total of 5.5 million.

This disturbingly high leap has rightly set off alarm bells at the Department of Energy and Climate Change, which has readily admitted that this increase is due to rising fuel costs rather than the recession.

The Department has, however, been slower to identify the trigger behind these inflated fuel bills, even though the answer is clear: green levies designed, but failing, to deliver low-carbon energy.

A household is classed as fuel poor if it has to spend more than a tenth of its income to maintain a reasonable level of warmth in the house. Yorkshire has borne the brunt of the fuel poverty rises, as 20 per cent of its households were classed as fuel poor in 2009 compared to an English average of 18.5 per cent. Until now, the recession had been blamed for increasing fuel poverty, due to eroded incomes. Thankfully, gone are these excuses; the Government has finally had to acknowledge the skyrocketing prices of energy in recent years. From 2004-09, domestic electricity prices rose by 75 per cent, and gas prices by 122 per cent. Why the huge increase? Soaring environmental charges.

Individual measures to drive renewable power, low-carbon investment and energy efficiency might be small proportions of bills, but they soon add up. Currently, a fifth of the average household energy bill, some £200, is made up of green levies, and worse still, this is money not necessarily well spent. A large portion of the blame falls on the EU’s Renewable Energy Directive, which states Britain should source 15 per cent of its energy from renewables by 2020 – a target that most economists agree is impossible to meet. Yet this hasn’t stopped the Government from trying, in a desperate bid to save face. Policies have prompted power companies to raise bills to pass through the cost of green obligations and to fund the construction of renewable sources, regardless of their efficiency. British Gas’s recent announcement of an 18 per cent price hike was blamed on the need to invest in future energy sources. In addition, the UK is paying for a quarter of the entire EU’s costs associated with the Renewable Energy Directive.

Many of the fuel costs are simply unjustifiable. For example, via energy bills and under the EU’s Emission Trading Scheme, every European citizen is currently subsidising the allocation of free permits to the largest European industrial CO2 producers to the tune of e32m (£28m). Many of these firms are just selling these permits on and making millions in windfall profits and this includes power companies. Clearly, something has gone very wrong.

Fuel costs have risen to the point where we must ask ourselves, “is it worth building renewable power sources if consumers can’t afford to purchase the electricity they produce?” The sensible answer is no. It is naive and illogical to believe the UK can continue like this, and that consumers will be willing to put up with it.

The Government has fundamentally misjudged public opinion. An EU survey from 2008 found that while 80 per cent of Britons feel climate change is a serious issue, only 40 per cent were happy to pay more for green energy. Politicians beware: green energy via domestic charges is not a vote winner.

This leads to a tricky situation. If the Government truly values the idea of green energy, it should not alienate voters from supporting the idea by forcing them to pay excessively for it. Predictably, as fuel costs have soared, so has pressure to dismantle the whole green package. It would be politically more viable to reduce the consumer burden and slow the pace on constructing renewable energy sources, while protecting the environmental agenda.

Already, one in five households are fuel poor, and more charges are already waiting in the wings. The solution is simple: abandon the fantasy targets of the Renewable Energy Directive and shave that cost off energy bills.

There is no point needlessly driving millions of people into fuel poverty. In addition, the Government should establish an upper limit to the bill increases companies are allowed to implement. Tethering this to inflation, with flexibility to account for the fluctuating prices of fuels, will go a long way to alleviating the problem.

The Government has misplaced its priorities in consciously aggravating fuel poverty and reducing the quality of life for a significant sector of the population. Now is time for it to remember that while we do have to prepare for the future, we also have to live in the present.

David Merlin-Jones is a research fellow at the independent think-tank Civitas. He specialises in industry and energy

Yorkshire Post, 27 July 2011