Higher energy bills for majority by 2020 despite government reassurances

By Juliette Jowit, political correspondent guardian.co.uk,

Energy and climate polices will only reduce bills for a third of households, analysis of figures obtained by the Guardian shows

Energy secretary Ed Davey (right, with Nick Clegg) said a big uptake of loans to lag lofts and walls could save Britain the equivalent energy of two nuclear power stations. Photograph: Dan Kitwood/Getty Images

Two out of three householders will pay higher energy bills at the end of the decade despite government reassurances that the average home will fork out less as a result of costly energy and climate policies.
The figures, obtained by the Guardian, come as the new energy secretary, Ed Davey, dedicated his first speech in the job on Wednesday to announcing new measures to step up home energy efficiency amid concern about public opposition to the cost of government policies.
Annual forecasts published by the Department for Energy and Climate Change (Decc) calculate by 2020 household heating and electricity bills will be driven higher by wholesale gas and oil prices, but will be on average £94 lower as a result of measures to increase renewable energy in lieu of fossil fuels, and cut overall energy use through efficiency.
But a deeper analysis requested by the Guardian shows that only one in three homes, or about 10.3m households, will see the predicted reductions in their combined bills as a result of installing one or more of the renewable energy or efficiency measures, or receiving the Warm Home Discount for low-income and vulnerable households. Meanwhile the majority of bill payers, 19.1m, will see an average increase in their bills, over and above the extra costs of rising fossil fuel prices and huge investment in the electricity grid.
These figures follow months of criticism about the cost to home owners of government policies, with critics questioning official forecasts of how much money will be saved by putting smart meters into all homes so bill payers and energy firms can manage the amount used more carefully. The analysis seen by the Guardian also shows the government has based its forecasts for money saved on an oil price up to US$20 a barrel higher than those used by organisations such as the International Energy Agency – with the effect of increasing the estimated savings and flattering the effect on their policies.
Davey, in his first speech since becoming energy secretary following Chris Huhne's resignation last week, claimed that a big uptake of loans to lag lofts and walls could save Britain the equivalent energy of two nuclear power stations.
Announcing a new Energy Efficiency Deployment Office (EEDO) in London, the Liberal Democrat minister said: "I'm hugely enthusiastic about energy efficiency. It's the cheapest way of cutting carbon – and cutting bills for consumers. It has to be right at the heart of what we do.
"EEDO will be a centre of expertise, challenging our work and making energy efficiency real and relevant to people's everyday lives. Two out of three consumers think their home is wasting energy, but only one in three is going to do anything about it. That has to change. We need to get out there and show people what energy efficiency can really do for them."
The speech at the Peter Jones store in London was the second time since his appointment that Davey has talked about energy efficiency, which officials say is key to making sure household bills are not driven too high by government policies.
On Wednesday a Decc spokesman defended those policies, saying that overall average bills would be lower than with no government action, and that even homes that paid higher bills as a result would benefit. "The point of a low-carbon Britain is keeping the lights on, not being increasingly dependent on imports from sometimes volatile parts of the world, and also make sure Britain gets its share of the green industrial revolution," he said.
Responding to the use of a higher "central" oil price forecast, the spokesman added: "You have to make some extreme assumptions about oil and gas prices getting a lot cheaper in the future for this set of policies not to be very sensible for the British consumer."
Green MP Caroline Lucas said all householders should benefit from green energy policies, but warned that the government needed to do more to encourage the take-up of renewable technology, such as wind turbines and solar panels, as well energy efficiency make-overs.
"There's no doubt it will cost money to transform our ageing energy infrastructure to deliver the green, secure power we need for the future, but failing to wean ourselves off oil and gas will cost us much more," said Lucas.
"Unfortunately, the government's plan to make these measures happen falls far short of what's needed. Ed Davey must now make it a personal priority to strengthen this weak and underfunded programme to maximise take up and deliver a good deal for households."
Decc's figures show that in both cost and as a percentage of income, all income groups and almost all household types will pay more for energy bills in 2020 if they do not implement any green energy measures or receive the Warm Home Discount. More worryingly, the increase in energy costs as a proportion of household income is greatest for the 10% lowest earners and pensioners.