The cost of action to tackle climate change and improve energy efficiency has been offset by reductions in household energy bills since the Climate Change Act was passed, according to new analysis by the Committee on Climate Change (CCC).
While measures to deliver a low-carbon electricity system added around £9 a month to the typical UK household energy bill in 2016, this was more than offset by a cut of over £20 per month due to reduced energy demand, mainly from more efficient lights and appliances.
In 2016, low carbon-policies made up around 9% of an annual ‘dual fuel’ household energy bill of around £1,160. The majority of the typical household bill resulted from wholesale, transmission and distribution costs which are unrelated to the government’s low-carbon policies.
The conclusions are set out in the CCC’s fourth independent assessment of the impact of carbon budgets on energy bills, Energy prices and bills – impacts of meeting carbon budgets’.
The committee found that for typical ‘dual fuel’ households, which use gas for heating and hot water and electricity for lights and appliances, paid (in real terms) £115 less per year for their energy in 2016 than in 2008 when the Climate Change Act was passed. The total bill includes a little over £100 annually to support the UK’s transition to a more efficient, lower-carbon energy system but also reflects lower energy demand, largely due to more efficient appliances.
Improvements in energy efficiency have saved the typical household around £290 per year since 2008 as demand for electricity and gas has reduced. This saving has come largely through the replacement of older products such as fridges, freezers and boilers with new, higher-standard energy efficient alternatives.
The report said the gradual shift towards low-carbon electricity could add a further £85-120 per year to a typical bill by 2030 if further policies to meet UK climate objectives are put in place. Further improvements in energy efficiency have the potential to deliver significant savings for households in future (around £150, or more if wholesale costs continue to rise), which will more than offset the cost of shifting towards low-carbon sources of energy.
The committee found that UK electricity prices for businesses are higher than those in comparable countries, such as France and Germany, but gas prices are lower. Higher electricity prices are largely explained by higher UK wholesale and network costs. The committee called for more detailed study and greater transparency about the different costs of electricity supply across Europe.
Further, the report found that if all climate-related policy costs on businesses were passed on to consumers through higher product prices, this could have added up to 3p to the average £10 basket of goods and services in 2016, which could rise to about 6p by 2030. However, overall low-carbon policies have not had a major impact on UK competitiveness to date.
Lord Deben, CCC chairman, said: “Action to deliver a cleaner, more efficient energy system is already delivering benefits for households and businesses. UK emissions are falling – down 38% from 1990 to 2015 – while GDP has risen by almost 65% in the same period. Meanwhile, the typical household energy bill has fallen in real terms since 2012. The UK’s progress to reduce emissions, and its comparative advantage in important areas such as the automotive sector, offer opportunities for future growth and employment while delivering vital action to tackle climate change.”
Juliet Davenport OBE, chief executive of renewable energy company Good Energy, said: “For far too long consumers have been under the impression that action to tackle climate change is costing them more money, so it is right to highlight low carbon developments and raising energy efficiency standards in households as actually helping to drive down electricity bills and reduce the cost of decarbonisation.
“The vast majority of the public want to see a transition to renewable energy in the UK and this analysis is yet further evidence that this is the right thing to do. The government’s upcoming Clean Growth Plan must not ignore these findings and we look forward to the paper setting out a bold and detailed plan for a clean and sustainable future.”
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