Green Subsidies Feel Heat In UK Energy Cost Crunch

Higher retail energy prices are roiling the U.K. political scene, and are beginning to put pressure on the country’s alternative energy ambitions.

So far, the Tory prime minister David Cameron has defended green subsidies as vital to reducing carbon emissions – but he added ominously this week that they would not be maintained “for a moment longer than is necessary.” Ed Davey, the energy secretary – a Liberal Democrat in Cameron’s coalition government – who is considered more stalwart in his defense of alternatives to fossil fuels, pointed out that the higher prices UK citizens are paying to power and heat their homes and businesses have more to do with rising wholesale gas prices than they do with helping grow wind, solar and other renewables while also investing in efficiency and energy savings.

scroby sands wind farm

Scroby Sands Wind Farm (image via RenewableUK)

And yet just a day after Cameron backed sustained subsidies, it emerged that his fiscal-hawk chancellor of the Exchequer, George Osborne, wants to cut one of those green subsidies: financial support for energy efficiency in poorer households.

A March report from the Department of Energy & Climate Change said the average U.K. household had a total annual gas and electricity bill of £1,267. Green subsidies were said to account for  £112. The government said that more 60 percent of the rise in energy prices between 2010 and 2012 was due to wholesale energy costs, and just 15 percent was attributable to climate change policies.

And that doesn’t take into account energy bill savings gains from efficiency policies. The government noted that with investments in efficiency and energy savings factored in, policies will actually result in a smaller increase in energy bills by 2020 than would happen otherwise.

But that’s 2020, and right now, people are howling, especially after the big power provider SSE said it would raise rates by 8.2 percent. It put much of the blame for the increase at the feet of government policies.

“(O)ver many years policymakers themselves have failed to highlight adequately the cost to consumers of the policies they have pursued in government,” the company said. “They can’t expect to have power stations replaced with new technologies, the network to be upgraded and nationwide energy efficiency schemes all to be funded for free.”

The company’s suggestion is to fund the cost of policies “out of general taxation” instead out of energy bills.

Labor’s Ed Miliband has a different idea: He called  said a Labor government come May 2015 would  freeze on energy prices for 20 mmths. “Labour’s energy freeze will save money for 27 million households and 2.4 million businesses,” he tweeted.

Pete Danko is a writer and editor based in Portland, Oregon. His work has appeared in Breaking Energy, National Geographic's Energy Blog, The New York Times, San Francisco Chronicle and elsewhere.