What the government is doing to drive your energy bill up

Late on Friday afternoon, the Department of Energy and Climate Change released a document detailing how the government has done to keep consumers bills down. The article, aside from appearing as self-congratulatory piece to promote the department as a pro-active force for good, listed five ways in which this has been achieved.

It confirmed there was now increased competition in the supplier market, that switching supplier was now easier, that the energy sector was now fairer than it had been and a raft of policies had been enact to control the cost of public subsidies. It also highlighted future changes, most notably the rollout of smart meters.

But has the government even been that successful in driving bills down? As ever with things steeped in political procedure, it’s not quite as crystal clear and there are just as many things the government has done to drive bills up.

 

1 – Hand energy intensive industries an exemption from renewables subsidies

EIIs, including those in polluting industries, got a significant boon from the chancellor during November’s autumn statement with a complete exemption from subsidy costs attached to electricity bills. In what has proven to be a politically-charged move seen as a boost for the flagging steel industry, the government heaped an extra £5 per year onto household bills – more than DECC saved consumers by trimming the FiT.

 

2 – Chucked money at diesel generators to fulfil needed capacity under the Capacity Market

December’s Capacity Market Auction has proven to be highly contentious. A number of potentially lucrative contracts were handed to diesel generators in order to fill the amount of required back-up capacity. Said generators are now currently being built out and shadow energy secretary Lisa Nandy fought tooth and nail for an admission from the secretary of state Amber Rudd that the extra subsidy will be added to consumer bills. Rudd has been vague on the precise figure though, deeming it to be less than £10 per year from 2018 onwards.

 

3 – Reducing the Merit Order Effect by slashing renewables support

The tumbling wholesale energy price has been one of the biggest stories for the wider electricity market of late, particularly Carbon Brief’s badgering of DECC through the freedom of information process to reveal that in July 2015 it forecast the wholesale price would plumb lower depths than previously expected. While the bottoming out of the oil price has been the central contributor to this, widespread deployment of renewables has also been a factor. The Merit Order Effect (MOE), which argues that as more, cheaper forms of generation come onto the grid, the net cost of subsidies falls as consumers enjoy cheaper electricity, has become one of the central criticisms of Tory energy policy. Good Energy analysis concluded that spending under the Levy Control Framework could be two-thirds less than previously thought if the MOE is applied, while the Solar Trade Association has estimated utility-scale solar to be cost-neutral to consumers. Slashing renewables support and capping solar deployment only serves to prevent consumers from enjoying lower bills.

 

4 – Handing exorbitant generation contractors to nuclear reactors

On the subject of the wholesale energy price, the lower it falls the more ridiculous a decision handing Hinkley Point C a £92.50/MWh strike price seems and, by extension, the more any future LCF pot will be strained by the deal. Even EDF investors are up in arms claiming the deal to be too expensive for the company to stomach.

 

5 – Undermining the potential for self-consumption

If crippling the solar industry with a 64% cut to the FiT and stringent deployment caps wasn’t enough, DECC appears to be particularly reticent to embrace domestic storage. The technology remains shrouded in red tape and has been deemed inappropriate for inclusion under the feed-in tariff, unlike in Germany where it has been confirmed domestic storage installations will be incentivised. In dragging its own feet and pulling the rug from beneath solar’s, DECC is only preventing self-consumption from truly taking off. Surely helping as many people use as much of their own electricity as possible would reduce bills far more than any policy ever could?