Cheap energy revives US manufacturing, skint Brits shiver
Energy policy here and there
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The battle of crystal ball gazers over how much we'll be paying for energy in the future rages on. The government's advisory panel on global warming has weighed in, with a report on household energy bills. The Climate Change Committee uses slightly different assumptions to the Energy Department, and only looks at a slice of the market, but arrives at the same cheery conclusion: carbon policies will add a mere £110 a year to fuel bills by 2020.
If you read the small print, you'll find the CCC uses the same broad assumptions as DECC. The CCC assumes we'll be using much less energy - 19 per less than today - which means chucking out our energy-guzzling flat panel TVs and iPads. And we'll buck the trend to warmer homes by turning down our thermostats - by one degree. And the cold winter of 2010 won't be repeated. That's a lot of ifs.
There's an elephant in the room however, with 'cost' tattooed on its backside. The double whammy of replacing Britain's generation capacity and replacing them with expensive, renewables in remote locations comes at a price. £100bn for the windfarms, £40bn to connect them to the grid, and £100bn on backup: conventional gas stations that provide power when the wind doesn't blow. Since money can't be magicked out of thin air, and the debt-ridden state can't help either, that leaves consumers picking up the tab.
At an event this month the Renewables Energy Foundation estimated the cost of meeting the EU Renewables Directive at £15bn a year (£8bn subsidy, £5bn grid integration, £2bn VAT) - that's £170 per household, all things being equal. But, actually, costs aren't evenly distributed: electric-only households will see their bills rise by £320.
Climate change campaigner George Monbiot today suggested a rebate for the poorest 20pc by raising bills for wealthier households even further - "you would reverse the regressive element" - he suggested. But the middle will still have to find the bulk of it; "you can't distribute the problem away," says Matthew Sinclair of the Taxpayers' Alliance, and author of Let Them Eat Carbon.
You pays your money, and takes your pick. The cost-centric view looks hard-nosed and realistic, while the other, backed by DECC and CCC, looks quite utopian.
Yet all three make the assumption that gas prices will remain high. The era of cheap fossil fuels is over, we are told. But if new unconventional gas sources do to prices here what they have done in the US, that assumption is false. The natural gas price has halved in five years on the US market Nymex, to $3.14/mmBTU, down from a spike of $14 in 2007.
In a new report this week PwC predicts US manufacturing will undergo a renaissance thanks to cheap energy, with shale gas saving industry $11.6bn in lower, not higher bills. By remaining wary of climate change mitigation policies, the US economy seems to have dodged a bullet. ®
Related Links
CCC on Household Energy Bills
PwC on cheap energy for US manufacturing
REF on ROC[pdf]
COMMENTS
Build nuclear stations, please!
The gales the other week told me all I needed to know about the folly of wind farms. We all knew that when the wind doesn't blow, they don't work. Well, it turns out that when the wind blows too much, they fall over, catch fire or throw their component parts in all directions.
Brilliant.
Given such a narrow operating window which we don't control, how exactly do wind farms justify their cost?
UK.gov, please build some new nuclear plants!
You silly, silly man - you didn't get the memo
You silly, silly man - you must not have gotten the memo.
EVERYTHING THE US DOES IS BAD. If the US lowers energy costs and increases its manufacturing, and improves its economy, then OBVIOUSLY this must be bad, and it is your DUTY as a journalist to find that spin: "The US is ROBBING the REST OF THE WORLD by dumping carbon on them."
Remember: it doesn't matter what we do - WE ARE THE US: WE ARE EVIL. We could find a way to power our whole economy on happy thoughts and rainbows, converting CO2 into a cure for AIDS, and it would be evil, somehow.
Even the very fact that I am pointing this out to you, given my US citizenship, is evil, and must be downvoted - GET IT RIGHT, MAN!
Carbon policies will add a mere £110 a year.
I resent the use of the word "mere". This is no trifling amount and squandering it in this way to achieve little or nothing is an afront. There. I said it.
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