A clean energy revolution means a rise in energy bills
There seem to be two main topics that dominate news in the British energy sector:
- The UK is encouraged to lead the world in the clean energy revolution;
- but, spiralling energy costs are putting a strain on domestic and business users.
This is a bit of a conundrum. Point 1 is a root cause of point 2. And without point 2, point 1 can’t happen at all. News articles come out on an almost daily basis claiming that suppliers are filling their pockets through price hikes. But there is much more to it than that. Let’s break this down:
Five years ago, non-energy costs accounted for approximately 20% of the total cost on an electricity bill. Today this cost is just over 50%. The main reason for this is increase is that the government – not the suppliers – needs this additional revenue to re-invest back into our clean energy revolution through renewable technologies and environmental regulation.
In 2015, wholesale energy costs hit record lows due to a series of mild winters and the previous and prolonged collapse in oil prices. This reduction masked the increases we were seeing in non-energy costs. Since mid-2016, wholesale prices have gradually increased, meaning that we as consumers are only starting to feel these price increases now.
The truth is, it’s unlikely that wholesale prices will move back down to the levels seen in 2015, especially with more uncertainty than ever within the global political landscape. We need to face facts and accept that higher energy tariffs may be here to stay. Furthermore, we need to stop placing sole blame for these increases on suppliers or lack of competition and accept that if we are to move towards this cleaner energy world then energy prices will have to increase.
The clean energy revolution will lead to new opportunities for us as consumers. We will achieve savings through changes in how we use our energy, not just by seeking the cheapest tariff. Currently, we are stuck in limbo. We’re being hit by price rises and the UK energy system is not yet fully ready for small scale demand side response. We’re probably still 3-5 years away from this system shift. But with any significant change comes a period of pain and uncertainty.
That time is now. But there is a light at the end of the tunnel.