Net Zero Watch today condemned the inaccurate and misleading statements about current and future energy policy costs made by the Rt Hon Kwasi Kwarteng MP, the Secretary of State for Business Energy and Industrial Strategy (BEIS).
Mr Kwarteng was interviewed by Nick Ferrari on LBC. Asked about the costs of the Net Zero transition,[i] he said that “I don’t think tax rises are inevitable” and added that the “green transition” over the last ten years had seen coal replaced mostly by renewables “and the costs haven’t gone up”.
As a matter of public record, Mr Kwarteng’s statement is untrue. The “Fiscal Outlook” published by the Office for Budget Responsibility (OBR) shows that subsidies to renewables, which began in 2002, now add £10 billion a year to electricity costs.[ii] This figure does not include all the increased system management and grid expansion costs. The OBR’s table is reproduced here for the avoidance of doubt:
The direct subsidy schemes are the Renewables Obligation and the Contracts for Difference scheme, which supplement the incomes of renewables generators. The OBR also correctly includes the cost of the Capacity Market, which is required to stabilise the electricity system in the presence of unreliable wind and solar generation. It should, however, be noted that for technical reasons the OBR currently does not report in this table the costs of the Feed in Tariff schem (FiT) for small renewable generators, such as rooftop solar. However, these also increase electricity prices to consumers. The cost can be found in the Ofgem’s Feed-in Tariff: Annual Report, which reveals that payments under the FiT scheme in Year 10 were £1.5 billion.[iii]
Mr Kwarteng’s suggestion that “costs haven’t gone up” is therefore manifestly false and suggests that he has only the weakest grasp of the facts.
Further evidence of his lack of understanding can be found in an interview with the Today programme on 20 October.[iv] Asked on what grounds he predicts in his introduction to the Net Zero Strategy text that there will be “up to £90bn of private investment in the green transition by 2030″ and “What evidence is there for that heroic scenario of £90bn private investment?” Mr Kwarteng replied:
We the evidence that we have is what happened in the last 9 years […] Now I can tell you in terms of the offshore wind deployment we’ve already had, seen £100bn in the last 9 years deployed in offshore wind, in one particular renewable sector. So, it’s not a heroic assumption to say that by 2030 we will have attracted an additional £90bn.
However, as noted above, subsidies to renewables are extremely generous, and the huge investment in wind power is entirely motivated by them. Examination of the official records of the Renewables Obligation and the Contracts for Difference schemes, held by Ofgem and the Low Carbon Contracts Company, show that total subsidies to wind now amount to £6.1 billion a year, with £4.4 billion of that sum going to offshore wind. In essence the investments in offshore wind are not private money at all, since the electricity consumer is forced by law to de-risk the investment and carry the cost. No private capital would come forward without the guarantee provided by the subsidy. Mr Kwarteng’s statement is therefore deeply misleading.
Mr Kwarteng came under pressure from the interviewer in discussing home heating, and was forced to concede that even if the cost of heat pumps fell from the current level of £10,000 and upwards, they would still cost what for many households was “a lot of money”. The BBC presenter then focused on the issue of the cost to private individuals of the government’s policies:
…if people are going to have to insulate their own homes and they are going to have to try and make the switch from gas boilers to heat pumps […] this is all going to cost people individually a lot of money, isn’t it? […] We are individually going to have to pay if Britain is going to reach its [Net Zero] target.
Astonishingly, and in apparent contradiction of his admission that heat pumps would still cost “a lot of money” Mr Kwarteng replied: “No, I don’t agree with that at all”. the BBC interviewer expressed his surprise “What, individuals aren’t going have to pay if Britain wants to be carbon neutral by 2050?”
Mr Kwarteng evaded the question by turning to the overall economic impact and refusing to discuss the impact on individuals:
No….as far as our economy, the green challenge if you like represents an enormous opportunity. […] It’s not true to say that the green transition will cost us economically. In fact, I think it represents an economic opportunity.
Mr Kwarteng then went on to repeat the claims he made in speaking with LBC – that the introduction of renewables had not caused an increase in consumer costs. This, as we have shown above, is untrue.
At one point in the discussion the BBC interviewer asked Mr Kwarteng “Why can’t you be straight with people and say that people might have to change their lifestyles, people might have to fork out a lot of cash to contribute to this target?” Quite.