Energy

Energy and Climate Change written question – answered on 6th September 2013.

Alert me about debates like this

Photo of Chris Heaton-Harris Chris Heaton-Harris Conservative, Daventry

To ask the Secretary of State for Energy and Climate Change what estimate he has made of the total cost to (a) consumers, (b) industry and (c) government of energy and climate change policies in each year since 2002; and what the costs have been of each such policy. [R]

Photo of Gregory Barker Gregory Barker The Minister of State, Department of Energy and Climate Change

The Government publishes an annual estimate of the impacts of all climate change and energy policies on energy prices and bills for households, medium-sized businesses and energy-intensive industries. The most recent report was published in March 2013(1), showing the estimated impacts on prices and bills for 2013, 2020 and 2030.

We do not have estimates of the total costs to consumers of all policies in each year since 2002. However, Table 1 provides cost information that is available for policies which place obligations into energy suppliers, who pass the costs onto consumers through their energy bills.

This is the most up-to-date information available, but for some policies this is not available on an annual basis and costs are shown over the entire lifetime of the policy. Costs are shown for calendar years or financial years depending on the policy in question.

In terms of how these costs fall on different consumers, the Government does not dictate whether and how policy costs are passed on through energy bills and it remains up to the energy supplier if and how to recover these costs. Therefore it is not possible to be definitive about how these costs have been recovered across different consumers (i.e. households and businesses) over a number of years.

Our assumption however is that companies will pass on the costs the way they are levied, typically on the basis of relevant units of energy supplied. For those policies that apply to both households and non-domestic consumers (eg the renewables obligation and feed-in-tariffs) our assumption is that, approximately one-third of the costs fall on households and two-thirds on the non-domestic sector—reflecting their respective shares of total electricity consumption.

There are also some policies (eg energy supplier obligations such as CERT) which only apply to households and are only assumed to be levied on them, while others (eg the climate change levy) only apply to non-domestic consumers. However, taken as a whole, approximately one-third of policy costs faced by energy suppliers are assumed to be passed directly onto household bills.

There are a number of policies that are funded through general taxation. These include up to £1 billion for the CCS commercialisation competition, around £200 million capital funding to support the launch of the Green Deal, the Renewable Heat Incentive (£1.9 million and £27.4 million in 2011-12 and 2012-13 respectively (2012-13 prices) and the renewable heat premium payment (£9.5 million and £12.7 million in 2011-12 and 2012-13 respectively (2012-13 prices(2)).

Table 1: Estimated costs of energy and climate change policies since 2002
Policy Time period considered Estimated cost to date (£ billion, Real 2012 prices)
Energy Efficiency Commitment (EEC) I April 2002-March 2005 (3)0.5
Energy Efficiency Commitment (EEC) II April 2005-March 2008 1.1
Carbon Emissions Reduction Target (CERT) April 2008-March 2011 (4)3.4
Carbon Emissions Reduction Target (CERT) Extension April 2011-December 2012 2.0
Community Energy Saving Programme (CESP) October 2009-December 2012 0.3
Policy Time period considered Estimated cost to date (£ billion, Real 2012-13 prices)
Feed in Tariffs(5) (FiTs)* 2010-11 0.01
  2011-12 0.15
  2012-13 0.50
     
Renewables Obligation(6)* (RO) 2002-03 0.38
  2003-04 0.56
  2004-05 0.64
  2005-06 0.73
  2006-07 0.88
  2007-08 1.04
  2008-09 1.18
  2009-10 1.23
  2010-11 1.42
  2011-12 1.53
  2012-13 1.99
     
Warm Home Discount(7)* 2011-12 0.24
     
Climate Change Levy(8)* See footnote
* Active policies (1) https://www.gov.uk/government/publications/estimated-impacts-of-energy-and-climate-change-policies-on-energy-prices-and-bills (2) Source—DECC Annual Reports and Accounts: https://www.gov.uk/government/publications/annual-report-and-accounts-2012-13 (3) Calculations of EEC I, EEC II, are based on an evaluation of costs by Eoin Lees Energy, Available at http://eoinleesenergy.com/ (4) Calculations of CERT, CERT Extension and CESP are based on impact assessments published by DECC. (5) Costs represent FITs Levelisation Fund, and include generation payments, deemed export payments claimed by generators, qualifying (administration) costs claimed by FIT licensees, minus the value of deemed export to licensed electricity suppliers. Figures for 2010-11 and 2011-12 are taken from the Ofgem Annual FITs Report for those years. See https://www.ofgem.gov.uk/environmental-programmes/feed-tariff-fit-scheme/feed-tariff-reports/annual-reports Figures for 2012-13 are taken from Ofgem FITs Quarterly Update reports. See https://www.ofgem.gov.uk/environmental-programmes/feed-tariff-fit-scheme/feed-tariff-reports/fit-update-reports These figures should be treated as provisional. Final figures for 2012-13 will be published in the 2012-13 FITs Annual Report (to be published December 2013). (6) Spending under the Renewables Obligation is calculated as the overall obligation multiplied by the buy-out price. These figures can be found in Ofgem's RO annual reports for 2002-03 to 2011-12, available at: https://www.ofgem.gov.uk/environmental-programmes/renewables-obligation-ro For 2012-13, the obligation level and buy-out price can be found at: https://www.ofgem.gov.uk/publications-and-updates/renewables-obligation-total-obligation-levels-2012-13 (7) Ofgem (2012) 'Warm Home Discount Scheme Annual Report—Scheme Year 1': https://www.ofgem.gov.uk/ofgem-publications/58950/whdar08oct2012.pdf (8) HMRC publish data from 2008 (see link). The tables provide historic data since the beginning of the CCL: http://www.hmrc.gov.uk/climate-change-levy (9 )https://www.gov.uk/government/publications/estimated-impacts-of-energy-and-climate-change-policies-on-energy-prices-and-bills

It should be noted that the above figures do not account for the direct benefits to energy consumers from these policies and the impact they have in helping to offset costs. For example, the Government's latest estimate of the total impacts of energy and climate change policies on energy prices and bills(9) finds that in 2013 households are estimated on average to save around 5% (or £65) on their energy bills compared to what they would have paid in the absence of policies. This is because the total monetary savings from policies which help households save energy more than offset the necessary cost of investing in new capacity and efficiency. By 2020 it is estimated that households will save on average 11% (£166) on their energy bills compared to what they would have paid in the absence of policies.

Separate estimates of the compliance costs of the EU ETS can be found here:

http://webarchive.nationalarchives.gov.uk/20121025080026/http://decc.gov.uk/publications/basket.aspx?filetype=4& filepath=what+we+do%2fglobal+climate+change+and+energy% 2ftackling+climate+change%2femissions+trading%2feu_ets%2 fpublications%2f895-cost-euets-uk-operators-compliance.pdf

Does this answer the above question?

Yes0 people think so

No0 people think not

Would you like to ask a question like this yourself? Use our Freedom of Information site.