From NOT A LOT OF PEOPLE KNOW THAT

By Paul Homewood

h/t Ian Magness

But the main reason UK inflation remains exceptionally high is our still elevated energy costs – a serious problem, which shows little sign of being resolved.

The UK’s domestic energy production has been 14pc below pre-pandemic levels over the last year, according to the latest Digest of UK Energy Statistics. Oil production was down nearly 30pc on 2019.

During 2022, high energy prices saw energy consumption – down 11pc on pre-Covid levels – fall further across all sectors, impacting broader economic growth. And energy prices have been slow to fall.

Wholesale gas prices in the US were 80pc below those across Europe during 2022 – and remain much lower now. That’s because the US has hugely expanded energy production, exploiting shale reserves.

Residential electricity prices in the UK, meanwhile, were €45.3 per kilowatt hour during June, compared to a European Union average of €45.3 according to the HEPI index. In the US, prices averaged €18.9.

Ongoing “green levies” on UK utility bills, used to subsidise renewable energy, have lately been suspended across many major European economies. In Britain, though, taxes and network charges still account for 56pc of household electricity bills, compared to 40pc across the EU – this share simply must be brought down.

Above all, our “marginal-cost pricing model” keeps UK energy bills comparatively high. It’s true that wind, solar and other renewables generated two-fifths of the UK’s electricity last year – out-stripping gas. But “cheap” renewables, far from cutting consumer energy bills, are pushing prices up.

Renewables still depend heavily not only on subsidies, but also a large fleet of gas power stations on standby – which must be fired up on days when the wind isn’t blowing and the sun doesn’t shine.

Such “intermittent” periods can last weeks, especially during winter, when energy demand is high. But having gas-fired stations on standby to facilitate more renewables is hugely expensive – as the sky-high fixed costs of being able to produce energy at short notice must be found from smaller revenues.

Even on days when it is sunny and windy, UK electricity prices are driven by the marginal cost of generation ­– that is, the spot price of gas. The shift to renewables inflates this marginal cost, pushing up household bills too – whatever we’re told about “low cost” renewable energy.

Renewable companies make serious money from the very intermittency problems they’re meant to be solving. The government takes a big slice – via a low-key but hefty renewable windfall tax.

Marginal cost energy pricing has seriously aggravated the UK’s cost-of-living crisis, explaining at least part of our inflation problem. Yet rather than reforming this pricing system, easing household bills, the government raids renewable profits – an ever-increasing household energy “stealth tax”.

Since the Tories won the Uxbridge by-election amidst widespread opposition to Sadiq Khan’s Ulez expansion, there’s been talk of watering-down “net zero” deadlines and other green targets. This builds on a sentiment that’s grown considerably over recent months.

The question of how we get to “net zero” – and who pays – is increasingly-debated, becoming more and more controversial. Reaching the 2050 target has enormous cost implications not only for households and firms, but also the government.

Between now and mid-century, subsidies and other “green investment” will add 21 percentage points to the UK’s national debt-to-GDP ratio, according to a recent Office for Budget Responsibility Report. In today’s money, that’s equivalent to £500 billion.

These are vast costs and, as long as “Net Zero 2050” remains in place, the process of spreading them around will become increasingly politically contentious. Any government wanting support for such targets to be maintained should start by finding a way to ensure renewables start delivering much cheaper energy bills.

https://www.telegraph.co.uk/business/2023/07/30/renewable-energy-net-zero-2050-cost-who-pays/