Power struggle

It is ‘immoral’, asserted Michael Fallon at this week’s Spectator energy conference, to force basic-rate taxpayers to subsidise wealthy landowners’ wind turbines and the solar panels of well-off homeowners. It is hard to remember the last time a minister was so frank about something which had been government policy until a few hours earlier.

As a result of changes announced by the government this week, consumers will save £50 a year compared with what their bills would have been. The cost of supporting energy bills for the poor will be shifted from energy bills to general taxation, and the obligation on energy companies to subsidise home insulation will be watered down. British Gas, the largest of the ‘Big Six’ energy companies, immediately announced that its dual fuel customers would see their bills cut by an average of £53 in January, while Npower promised a ‘conditional freeze’ on energy prices until 2015.

But these savings are pigeon feed compared to the costs consumers will have to pay to help the government reach the carbon–reduction targets to which it is legally bound via the Climate Change Act: reducing carbon emissions by 60 per cent on 1990 levels by 2030 and 80 per cent by 2050. Peter Atherton, head of utilities at Liberum Capital, has calculated that the investment required to hit the 2030 target will be £360 billion to £410 billion — equivalent to ten HS2 projects.

These costs — which the government has grossly underestimated and which the public will not be prepared to bear — will have to be passed on to customers’ bills. In the shorter term, consumers face a spike in bills around 2015 as a result of an energy crunch created by the closure of old coal-fired plants.