The government has said that new analysis published this week highlights the extent to which its policies are tempering the impact on household energy bills of global gas prices and network costs.
Although global gas prices and network costs have driven household energy bills up in recent years, and are predicted to continue to do so, the government claims it is pursuing policies aimed at putting a cushion between the price of energy and the bills paid by householders.
The government claims that while some policies are adding to household bills, others lead to reductions and that the net result is that households are on average better off than they would have been in the absence of policies.
Overall the package of measures, under the DECC’s ‘central fossil fuel’ scenario, is estimated to reduce household energy bills in 2020 by an average of 11 per cent, or £166.
Energy secretary Ed Davey said: “Global gas price hikes are squeezing households. They are beyond any government’s control and, by all serious predictions, are likely to continue rising.
“We are doing all we can to offset these global energy price rises, and while we have more to do, this new study shows our policies are putting a cushion between global prices and the bills we all pay.
“The analysis shows that our strategy of shifting to alternatives like renewables, and of being smarter with how we use energy, is helping those that need it most save money on their bills.”
The government will introduce exemptions from the Climate Change Levy for energy used in metallurgical and mineralogical processes from 1 April 2014.
REA chief executive Gaynor Hartnell said: “The cost of energy may be rising but households and businesses can take positive steps to limit bill increases with efficiency measures and investment in onsite renewables.
“Predicting future fossil fuel costs in a volatile international market is fraught with uncertainties. Investment in energy infrastructure is essential, as is the switch to renewable energy.
“Government intervention on both new generation and demand reduction should save households money overall. That’s got to be good news for the UK’s future security and prosperity.”
The 2020 figures in the report are subject to huge uncertainties and do not clearly identify the anticipated overall cost of renewables policy support by 2020.
The Electricity Market Reform (EMR) package does not distinguish between renewables and other low carbon technologies. It is also unclear whether the interaction of Contracts for Difference (CfDs) and the Carbon Price Floor (CPF) has been dealt with correctly.
Ms Hartnell said: “We think the analysis overestimates the cost of delivering the renewables targets – particularly if Ofgem’s anticipated gas supply crunch hits the UK.
“Nevertheless this analysis should help to reassure households that the cost of modernising our energy infrastructure can be mitigated.
“But given the relatively low proportion of energy coming from renewables in the UK and our continued dependence on fossil fuels, households remain vulnerable to unexpected and significant bill rises well beyond the figures suggested in this analysis.”