Guy Newey

Renewable costs on bills to double due to European target

As officials try to meet the Prime Minister’s promise to roll back the ‘green levies’ and cut the ‘green crap’, lots of attention has focused on the Energy Company Obligation (ECO), the Coalition’s flagship energy efficiency policy. Its aim is to improve the state of the UK’s woeful housing stock and to reduce the amount of heating people use.

The scheme is far from perfect. It offers too many subsidies to expensive measures like solid wall insulation, rather than much cheaper ones, such as loft insulation. Also, it has yet to show support for charity incentives that show people how to use less energy. But the general ambition is right. The only sure way you can get people’s bills down in the long term is by reducing their demand for energy.

Since 2005, energy use by UK households has fallen by a quarter. Most of this reduction is due to unglamorous measures like making boilers more efficient and insulating lofts and cavities. Rising bills have also been a factor, but energy efficiency policies have done much of the heavy lifting. Even if you don’t care about climate change, we should be making sure the most vulnerable people use as little energy as possible to keep themselves warm.

The idea of cutting the overall ambition to insulate our homes while doing nothing to hack back some of our pointless support for renewable energy is absurd. The Renewable Energy Target, which aims to deliver 15% of all energy from renewable sources by 2020, has been disastrous. This piece of EU legislation has driven many of the poor policy decisions of recent years. It will also drive bills higher in the next few years – the extra cost on the average bill to support Renewable Energy will go from about £45 a year to £108.

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