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Since the Autumn, our energy bills have been at the top of the political and media agenda.

David Cameron and Ed Miliband both recognize that with bills at their highest, something needs to be done – especially if they are to win votes in 2015.

Cameron has pledged to force energy companies to put customers on the lowest tariff possible (which they’ll have to do by July this year); whilst Miliband promises to freeze bills.

When we’re running public consultations for renewable energy projects, economics is a common concern. One of our jobs is to explain how much of your energy bill goes towards supporting new sources of clean energy. And people are often (pleasantly) surprised by the answer.

In November 2013, Ofgem attributed the six elements that make up the costs of a standard bill of £1,320 per year as follows (costs rounded up):

Green-energy-pie-chart

Of the 9% attributed to environmental and social costs, just under half of this is spent on energy companies’ obligations to implement energy-saving measures for low-income homes.

Just under a third of the 9% is a subsidy for large renewable energy development called the Renewables Obligation, and about 5% of it encourages smaller projects via Feed-in-Tariffs.

The remaining quarter is split between the warm home discount for pensioners; the emissions trading scheme (a cap on carbon emissions from business); the carbon floor price (a tax on fossil fuels); and smart metering costs.

So, of the £115 a year you might spend on environmental and social programmes, less than £40 goes towards the development of renewable energy.

The cost of fossil fuels is going up and our energy system needs upgrading, so it’s difficult to know where any cuts to our bills will come from. An unpopular choice would be to reduce support to vulnerable people, so perhaps ‘green taxes’ are an easy target.

Whatever the solution, we’re sure it will remain a hot topic as we move towards the next general election. Only 470 days to go!

 

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