Who will pay the highest price for Government energy policy?

Households who rely on electric heating, CSE research shows

6 June 2013

Research undertaken by CSE reveals that many households with electric heating will be hit hard by Government energy policies to decarbonise electricity generation – and may face an average annual bill increase of £282 by 2020.

This work was commissioned by Consumer Futures and was published in June 2013 in a report called ‘The Hardest Hit’. Click here to download a copy of the report.

CSE’s Ian Preston was the lead analyst.

"The report shows that the future design of policy needs to put fairness first rather than assessing the impacts after the fact. The press coverage to date* has primarily focussed on the losers whereas the report clearly identified some big winners from energy policy."

To identify the hardest hit, we looked at which households are going to benefit and which are going to be the losers as the Government rolls out its energy policies – like the EU Emissions Trading Scheme, Energy Company Obligations and Smarter Metering.

“Because energy policies are paid for mainly through our electricity bills, those households that use electric heating but don’t benefit from the various schemes and policy initiatives, will bear a greater share of the cost.

“We think that there may be as many as 2.1 million low income households who are the losers from current Government policy.”

These consumers are difficult to identify precisely but are likely to be either those living in purpose-built flats with electric heating, or households that include people of pensionable age in any type of property with electric heating.

Government support should therefore target support at these two groups.

‘The Hardest Hit’ calculates the average benefit to consumers of energy policy by 2020 to be £31, significantly lower than Government estimate of £166. The report also warns against relying on more efficient products and appliances to reducing consumers’ bills since the take up of new products may not be as high as predicted.

Headline numbers:
By 2020, the research predicts electrically-heated households will:

  • represent 11 per cent of consumers by heating fuel type
  • pay 19 per cent of the total cost of the Government’s energy policies
  • receive 7 per cent of the benefits of energy policies

Further, it predicts that, as a result of the Government's energy policies, those living in electrically-heated households and not receiving benefits will see their bills go up by an average of £282 per year. This compares with an average decrease of £31 per year for all consumers.

Adam Scorer, Director of Policy at Consumer Futures said: “The conclusion of the report is not surprising. Most of the Government’s policies, such as the Renewables Obligation and EU Emissions Trading Scheme, are funded through electricity bills. That means that households with electric heating will face a disproportionate share of the costs.  Many will be protected from such costs by benefits such as energy efficiency, microgeneration technology and bill discounts. But for those who are not protected, the impact on their bills will be significant.”

The research was carried out using CSE's DIMPSA modelling tool. The Government uses the same tool for its own analysis of the impact of its energy policies.

*  Here are a couple of examples of the press coverage:

Daily Telegraph | 5 June 2013
Green fuel policies will cost some families £400 a year, watchdog warns

Times | 5 June 2013
Green-energy drive could push up bills [paywall]

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