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The cost of renewable energy?
Unnecessary and hugely expensive renewable energy policies will cost the average household in Britain a total of £400 a year by 2020 – the equivalent to 2.5p on VAT – according to a new report by think tank, Policy Exchange.

The £400 is not the total cost of climate policy but the additional cost imposed because the Government subsidises expensive renewables such as offshore wind rather than cheaper ways of reducing carbon emissions.

The report – The full cost to households of renewable energy policies – accuses the Government of not clearly presenting the full impacts and costs of climate and renewable energy policies on households, and outlines how the UK could meet its carbon targets while saving households hundreds of pounds.

In the recent Annual Energy Policy Statement, Chris Huhne made much of a statistic that current climate and renewable energy policies would reduce households’ average energy bills by 7% by 2020.

The Policy Exchange said this headline message is misleading as it fails to make clear:

• The costs of policies paid for through general taxation, rather than through energy bills. The Government decided to pay for the Renewable Heat Incentive, for example, through general taxation rather than energy bills. This decision reduces the Government’s energy bill projections, but does not reduce the overall cost on a household.

• Higher prices for more energy efficient products. The Government projects that its drive for more energy efficient products will substantially reduce energy consumption. However, increasing energy efficiency standards will usually cost the manufacturers of the products more. Such costs do not show up in the Government’s energy bill projections, but do increase the prices households pay to buy their energy-using products.

• The knock-on costs from businesses’ higher energy bills. Businesses pay most of the costs of climate and renewable policies through high energy prices. However, most of these costs are ultimately passed on to households.

• That most households – those with less scope for improving energy efficiency – will see higher energy bills as a result of Government policies. The Government’s headline message about average bills disguises that around two-thirds of households will in fact be worse off.

However, the WWF argued that the report ignores the benefits of renewable energy, and is advocating a risky reliance on market mechanisms. It said that Policy Exchange is also ignoring the long term economic benefits to the UK in becoming a leader in deployment of renewables such as offshore wind, wave and tidal.

For example the latest research from Department of Energy and Climate Change (DECC) shows that so far this financial year companies have announced plans for almost £2.5billion worth of investment in renewable energy projects in the UK, with the potential to create almost 12,000 jobs across the country.

Nick Molho, head of energy policy at WWF-UK said: “Policy Exchange has used some pretty dubious maths and has ignored significant research by authoritative sources. Detailed modelling by CCC, Ofgem and DECC shows the impacts on energy bills will be far lower in 2020 and confirms that bills are sky-high right now because of our over-reliance on fossil fuels – specifically, gas. “Reports like this mislead the public and erode investor confidence in the sector at precisely the time when we need to attract investment. If we want to revitalise the UK’s economy we need to concentrate on building a new industry based on renewable energy and encourage investment through stable policies, not repeated chopping and changing.”

Chief executive of the Renewable Energy Association, Gaynor Hartnell, said: "It is bizarre to read reports like this Policy Exchange paper when renewables are the fastest growing energy sector in the world and the UK is trailing so far behind other EU countries. When authorities as mainstream as the IEA say urgent action on renewables is absolutely essential, it is disturbing to see people still trying to undermine the investment case.

“What Policy Exchange fails outright to acknowledge is that the costs of fossil fuels are on a long-term upward trajectory, while the costs of renewable energy are only going to come down.”

Read the report here

Finally, Riba argued that vulnerable historic and traditional older buildings should be identified and given skilled specialist attention to find the most appropriate solutions.