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DECC says renewable energy costs report ignores reality of market

Renewable Energy: the most expensive domestic policy disaster in modern British history claims the electricity sector is being transformed into a vast Public Private Partnership – an outcome it says promises state control of investment funded by high-cost private sector capital, with energy companies set to take the blame for high electricity bills.

The Department for Energy & Climate Change (DECC), however, said the report by the Centre for Policy Studies ignores the reality of the energy market.

The report argued the post-privatisation gains in productivity were now being reversed as a result of plunging labour productivity, with three-quarters of the productivity gains recorded between 1994 and 2004 lost by 2013.

Without renewables, it claimed the UK market would require 22GW of new capacity to replace old coal and nuclear – with renewables, however, 50GW is required.

“Then there are extra grid costs to connect both remote onshore wind farms (£8bn) and even more costly offshore capacity (£15bn) – a near trebling of grid costs,” the report stated.

The foreword, written by economist Sir Ian Byatt, argued that ministers have destroyed the emerging electricity market while talking about how it could improve competitive processes.

“They and their advisers have not understood that effective competition proceeds from the right structure of suppliers and works in innovative, not predictable, ways,” wrote Sir Byatt.

“Good intentions in the form of a desire to save the planet have led to our impoverishment. We need better analysis, greater transparency and more effective discussion of social and environmental issues, not Whitehall playing shops.”

The rebuttal from DECC said: “[The report] wrongly suggests that we can ditch renewables for gas, with no explanation of where we would source that from.

“It also appears to suggest that we should row back on the tremendous gains we have made in the fight on climate change. Given the dire consequences of global warming, this is not an option.

“Energy supply is a core part of keeping Great Britain great. In order to keep our hospitals, homes and factories running we need a reliable, cost-effective power supply, and that’s why the government is committed to developing sustainable energy.”

DECC said the UK had some of the best wind, wave and tidal resources in Europe and by exploiting these renewable resources it could make a strong contribution to its future needs for secure and affordable low-carbon energy.

The statement added: “Overall, our reforms mean that average annual household electricity bills will be around £41 lower over the period 2014 to 2030 than decarbonising without these changes. The bill impacts of these new contracts have already been accounted for and published.”

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