At the end of last week the government released the Cost of Energy Review. Dieter Helm was tasked with delivering a quick, but deep dive into the UK’s energy system to make recommendations on how we make energy cheaper in the UK while delivering the environmental imperatives: two things very close to our hearts at Thrive Renewables.
We agree with much of the high level direction of what Dieter Helm recommended: we must achieve greater energy efficiencies at home and in industry; we must transition to a smarter energy system, where supply and demand are dynamic, responding to energy availability.
How many of us, given a transparent choice would prefer to pay £9, or perhaps more per month to improve air quality and deliver the associated health benefits
We’ve long been advocates of a functional carbon dioxide emissions market, where there is a cost attached to emitting greenhouse gases (GHG), the polluter pays, thus driving low and zero GHG emission solutions forwards. Investment decisions are influenced directly by environmental performance and the market can successfully identify and employ the least cost GHG emission abatement technologies.
One of the study’s conclusions is that the growth in renewables’ contribution to the electricity sector (delivering almost quarter of the UK’s electricity in 2016, and anticipated to reach 30 per cent this year) has lowered the wholesale price of electricity. There is acknowledgment that following the falling cost of renewable technologies, that going forward renewable generation offers least cost electricity.
Helm also established that support for the proliferation of renewable electricity which has been delivered to date makes up 20 per cent of the cost of our electricity in the UK. So, what does this mean for the average household in the UK?
On average, we pay £554 per year for our domestic electricity consumption. So that implies we are paying £111 per year, or £9.25 per home, per month, for achieving one of the largest positive shifts in environmental performance the UK has ever seen.
Incidentally, we also pay effective subsidies for fossil fuel energy – a figure that the International Monetary Fund estimated is six times higher than the amount we pay for renewables.*
I fully appreciate that for our lowest income households £9 per month has a material impact. However, as the world’s fifth largest economy, it is incumbent on us to demonstrate some environmental leadership. The way electricity is sold could address the sad reality that those with the lowest incomes pay most for their utilities.
So, what could we be doing with our £9 per month? Sign up to an internet music or film streaming subscription, buy five newspapers, enjoy a posh coffee every week, or, deliver a material reduction in GHG emissions through our electricity system?
What is being achieved with our £9 per month? As mentioned above, we are sourcing more than 25 per cent of electricity from renewable sources, this means that annually there is now 1.6 tCO2e of emissions released into the atmosphere to generate our average 3,900kWh household electricity consumption.
If we wind back the clock to 2008, this was 2.0 tCO2e, and in 1990 2.8 tCO2e. Progress indeed. This has been achieved by reducing our dependence on finite fossil fuels, and increasing our use of abundant natural, renewable sources of energy.
We’ve almost halved the GHG emission intensity of electricity in the last 25 years – this is good news. However, there isn’t time for complacency. The GHG emission intensity of our electricity needs to halve and halve again (and quickly) from today’s levels if we are to achieve our 2oC ceiling which we and 168 other nations ratified following the Paris Climate Summit in 2015.
While we’d prefer to have been part of an energy revolution which had miraculously leapt over 25 years of technology development, climatic understanding, public consciousness and political thinking, the reality is that change takes time, and the collective leap we’ve made from ‘alternative energy’ to renewables and the associated environmental benefit has taken time and has a price, a price which is falling all the time and will dissipate over the coming years as existing facilities are retired and replaced with the next generation of best in class technology.
So we’ve made the leap, we are delivering more than 24 per cent of our power using renewables, now we can benefit from our learning, by more efficiently delivering the next 75 per cent while simultaneously lowering the cost of our electricity.
How many of us, given a transparent choice would prefer to pay £9, or perhaps more per month to improve air quality and deliver the associated health benefits, reduce the need to redesign our coastline to defend us from rising sea levels and more ferocious weather systems, keep our finite resources in the ground for when we really need them, and be proud of the legacy we are passing to future generations?
It feels like an investment worth making.