According to a new report by the Committee on Climate Change (CCC), recent increases in domestic energy bills are largely due to rising wholesale gas costs not those policies in place to achieve a low carbon economy. The committee states that findings in the report disprove claims that recent bill increases are due to environmental policy costs but are the result of major investments in low carbon power capacity which will increase bills dramatically over the next decade.
The analysis in the report focused on the 84% of UK households (21 million) that have dual-fuel energy bills (i.e. use gas for heating rather than electricity or other fuels). For these households, energy bills are set to rise from around £605 per household in 2004 to £1,060 in 2010 (£455). Of this increase, around 84% was unrelated to low carbon measures, with £290 due to increases in the wholesale costs reflecting increases in the price of gas and supplier costs, £70 due to increasing transmission and distribution costs and £20 due to VAT. Only £75 (16%) was due to policies that reduce carbon emissions, including £30 to support investment in low carbon generation and £45 for funding energy efficiency improvements in homes, says the CCC.
In the next decade energy bills are set to increase by £110 to fund investment in low carbon power capacity, energy efficiency in homes and grid investments. However there is a possibility to reduce bills relative to 2010 because the cold year meant the use of more central heating and because the UK’s boiler stock will be replaced by modern and more efficient boilers within the decade according to the CCC. Opportunities for further reductions can also be met through energy efficiency improvements such as insulation, LED lighting and better heating controls and appliances. If these improvements can be made then energy bills for 2020 will be marginally similar to the costs in 2010.
The outlook to 2020 by the committee also stated that bills for households that do not use dual-fuel gas/electricity, finding that bill impacts are likely to be similar for households with oil, liquid petroleum gas or solid fuels (7% of households). However the 9% of households with electric heating could be disproportionately affected by future costs of low carbon measures as these will predominantly fall on electricity bills.
