Most households will be 'worse off' due to government energy policies

Published:  23 May, 2012

Sixty-five per cent of UK households will be worse off if the government's proposed energy-efficiency measures are introduced, claims Renewable Energy Forum.

The forum has assessed the Department of Energy & Climate Change's (DECC) proposed energy efficiency measures, and believes the policies will cause domestic energy bills to increase. According to the Forum, government expects that 'only 35% of UK households will have lower energy bills as a result of the net impact of the government's energy and climate change policies'. This would leave the remaining 65% – some 17 million homes – worse off.

REF has published its own report – 'Shortfall, Rebound, Backfire : Can we rely on energy efficiency to offset climate policy costs?' – which claims DECC's policies will be responsible for major increases in the retail price of gas and electricity in 2020, with percentage increases for electricity ranging from +27% for domestic households to +34% for medium-sized businesses and, for gas, +7% and +11% respectively.

REF analysed DECC's 2011 Annual Energy Statement. In the section entitled ‘Estimated Impacts of Energy and Climate Change Policies on Energy Prices and Bills’, the government claimed energy-efficiency measures will protect domestic households by reducing consumption and thus preventing policy-driven price increases from being translated into increased bills.

In addressing Parliament in November 2011 Chris Huhne, then Secretary of State at DECC, said, "By 2020, we expect household bills to be 7% lower than they would otherwise be without our polices. Moreover, bills will be lower during this Parliament. Britain’s homes will be cheaper to heat and to light than if we did nothing, in this Parliament and in the longer term.’

But REF claims DECC’s own data show that 65% of UK households will be net losers even if all the energy-efficiency policies work exactly as described in the government’s plans, and costs of the climate change policies are correctly estimated.

Dr John Constable, one of the principal authors of REF’s study, said: "Mr Huhne should have said that even with very optimistic assumptions about high performance of energy-efficiency policies, his department calculates that bills would still rise for 65% of households. Instead, he chose to say that the “average” household would be better off. That was misleading, and Mr Davey, his successor at DECC, should correct the record."

Constable added: "There are several manifest failures of statistical propriety and methodological clarity in DECC’s work. The misleading use of an “average” household is a classic example of the deceptive statistics. We also found that in one key infographic the chart bars were not drawn to scale, concealing the government’s dependence on the Products Policy to offset policy costs. The fundamental data for other critical charts are not disclosed and appear not to be in the public domain, making the chart unintelligible. Some policy cost data tables even have over-rounded figures, reducing some cost entries to zero, making it very hard to check the reasoning behind the totals at the bottom of the table."

REF believes that DECC’s assumption of lower bills is overly dependent on extremely optimistic assumptions about the impact of the European Union’s ‘Products Policies’, to which the UK is committed, and which are meant to ensure improved efficiency of domestic appliances, as well as the impact of Smart Meters and the wholesale prices of renewable energy.

Constable concluded: "Major elements in the EU Products Policies on which DECC are relying to offset energy and climate policy costs are not even agreed by the member states, while the others are taking longer than expected to implement, so government claims about their effectiveness have little or no foundation in real-world data."