Chris Huhne gets it right on fuel bills
27 Oct 11 - Neil Davidson, Public Affairs Manager
Chris Huhne, our Secretary of State for Energy and Climate
Change, hit the right note yesterday when he highlighted the real
costs behind our domestic fuel bills.
Speaking at the RenewableUK annual conference in Manchester, he
was very much preaching to the converted. But his speech was a
timely riposte to the ill-informed commentary in the mainstream
media which has lately blamed the increase in our domestic energy
bills on the bogeyman of 'green policies'.
Huhne set the record straight. Right now, support for renewable
energy costs the average household less than six pence a day,
whilst the sharp rise in our monthly fuel bills has been caused by
the rise in fossil fuels - principally wholesale gas.
According to DECC's own figures, our average electricity bills
have increased in real terms by 30 per cent and our average gas
bills by 78 per cent in the last decade.
Rising cost of fossil fuels
This has been overwhelmingly driven by one factor alone: the
rising costs of fossil fuels. From 2000 to 2010, after adjusting
for inflation, the price paid by power producers for natural gas
increased in real terms by 90 per cent - peaking at 123 per cent
above 2000 prices in the year 2008.
The Government knows this. As recently as September Ben Moxham,
the Prime Minister's special adviser on climate and energy policy,
wrote "recent wholesale gas price increases [are] a significant
factor behind the household energy price hikes announced in recent
weeks… both wholesale gas and electricity costs are largely driven
by gas prices set in international markets (since gas-fired
generation determines wholesale electricity prices most of the
So why the dash for gas? Future fossil fuel prices are
notoriously hard to predict. In 2004 the Department of Trade and
Industry white paper estimated oil would reach $23 per barrel by
2010. Even last year DECC forecast oil at $80 per barrel. Brent
crude is currently trading at $110 per barrel.
Growing reliance on gas
Similar uncertainty pertains to gas. Yet we are becoming more
reliant on imported gas, not less. In 2000, we were net exporters
of gas, now we are importing 35 per cent of the gas we need. The
Government estimates that by 2025 we will be importing 65 per cent
of our gas.
Against this background, it makes sense for the UK to pursue a
mixed energy portfolio with a range of renewable energy sources
which will insulate Britain against future price shocks and give
consumers an element of certainty over their domestic fuel
Investment in renewables will bring jobs and economic benefits
to Britain. As Chris Huhne said, with such an uncertain future,
renewables offers Britain a secure, reliable indigenous energy
source with the potential to fuel a new industrial revolution here
in the UK.