By Jon Rees, Financial Mail on Sunday
Energy Secretary Amber Rudd has launched a groundbreaking project to
examine the actual cost of electricity generation in a move which could
spell the end of billions of pounds of subsidies for green energy.
The Department of Energy & Climate Change said its aim is to look at every
aspect of the cost of generating energy.
It will include not just the cost of constructing offshore wind farms, for
instance, but also of connecting them to the national grid – something
which critics of the green energy industry say is often overlooked by its
supporters. It will also examine nuclear power and conventional energy.
The study is being conducted by Frontier Economics, the consultancy chaired
by former Cabinet Secretary Lord O’Donnell.
A senior energy source said: ‘Many in the energy industry have suspected
that previous governments have been “economical with the truth” about the
economics of moving to a low carbon producing energy sector.
‘It may well turn out that certain kinds of renewable energy are not quite
as cheap as we thought when the billions paid over the years required to
support it are taken into account.’
Two years ago Prime Minister David Cameron promised to cut the ‘green crap’
from energy bills – referring to the green taxes which include the costs of
insulating homes and funding wind farms and account for more than £110 of
the average gas and electricity bill of £1,326.
However, this figure is dwarfed by the cost of delivering the energy to
homes, which accounts for nearly £300 of the average bill.
Subsidies to enable the UK to meet its legally binding commitments to
reduce greenhouse gas emissions by 2020 through the so-called levy control
network are on course to reach £9billion a year instead of the expected
£7.6billion.
A source said: ‘We might conclude we need less renewable energy than we
thought because there are other ways of doing it cheaper – by using
technology to reduce consumer demand, for instance.’
The review comes amid opposition to the Government’s plan to build two new
nuclear reactors – Hinkley Point C – in Somerset. The review comes amid
opposition to the Government’s plan to build two new nuclear reactors –
Hinkley Point C – in Somerset.
The Austrian and Luxembourg governments last month launched a legal
complaint against the Government which has been followed by a further
challenge from ten German and Austrian green energy firms.
The complainants say the UK Government’s subsidies may reach £76billion and
are in breach of European rules relating to state aid.
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