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UK energy bills to rise by an additional £5.3bn to fund 2020 emissions targets
Archived article dated Friday July 4th 2008
......but consumers not prepared to pay
At a time when consumer energy prices are already rising, a new report from Ernst & Young - Costing the earth? - has estimated that the typical UK domestic energy bill will need to increase by an additional 20%, and probably more, to pay for the cost of meeting the EU's 2020 emissions targets. This will lead to a total annual cost of £5.3bn to UK consumers in 2020. The 20% rise is the minimum additional contribution each domestic household will have to make through their energy bill, to fund the £100bn plus capital investment required for the UK to meet emissions reduction and renewable energy targets for 2020. The rise (which does not factor in commodity prices and strips out inflation) equates to an increase of £213 per UK household on energy bills, leading to many more consumers being caught within the government's definition of fuel poverty.
Simon Harvey, a director in the utilities team at Ernst & Young and co-author of the report says, “Customers face a triple whammy - rising fuel and oil prices, the costs of climate change mitigation, and on top of both, the additional investment required to become more energy efficient, for example by insulating the home. “However, the average consumer does not appear to realise that this additional cost is going to hit their wallets. There seems to be a worrying degree of apathy among consumers to reduce energy consumption, despite daily headlines about rising fuel bills.”
Harvey's comments are reflected in a YouGov poll conducted on behalf of Ernst & Young for the report. Half (50%) of British consumers surveyed said that they would not be prepared to reduce their energy consumption, even if their bill was to go up by £200 or more over a year, with 18 - 24 year olds (44%) the least likely to cut back on energy consumption, compared with 53% of those over 55. The poll also revealed that just over two-thirds of consumers aren't prepared to pay anything more for their energy bills to combat climate change. Consumers in Wales (78%) and the North West (74%) were the most likely to say that they shouldn't have to pay more, compared with 47% of people in London.
Commenting on the findings, Duncan Coneybeare, sector analyst in the utilities practice of Ernst & Young and co-author of the report says, “There's still a long way to go to convince the public of the personal costs of achieving emissions cuts.” 96% of respondents in the YouGov poll disagreed with the statement 'my home energy bill needs to rise to help combat climate change'.
Coneybeare also says that more education is required about the role consumers must play in achieving these targets through energy efficiency. “Government and the energy suppliers will have to cooperate in order to unlock the potential of energy efficiency savings.”
He continues, “A proportion of everyone's energy bill already goes towards paying for climate change mitigation, through mechanisms such as the EU Emissions Trading Scheme and the Renewables Obligation, but relatively few consumers are aware of that. This contribution will rise significantly as a proportion of a households' energy bill. That is the real impact of a low carbon agenda, but it seems customers are not yet prepared for the necessity or scale of that rise.”
Although consumers are not currently prepared to absorb additional costs, the majority (66%) conceded that they are personally responsible for reducing energy use in the home, with just 25% saying that they thought it was either the role of government or the utilities companies. Harvey believes this is positive and shows customers realise they have a choice, even if they are doing little to exercise that choice at present. He says that the average household can unlock savings from their energy bills if they are prepared to consume less by, for example, switching off appliances and buying more energy efficient devices.
“The challenge for government and the utilities companies is convincing the average UK consumer of the benefits of reducing energy consumption,” says Harvey. “Persuading a customer to install insulation requires changing their behaviour once. But convincing them to undertake the series of measures that will be required to tackle climate change will require multiple changes in behaviour.”
He concludes, “There is no silver bullet to meeting the UK and EU imposed reductions in emissions by 2020. Successfully achieving those targets in the UK will require concerted action by energy suppliers working in partnership with government, little to no delays in the construction of low carbon generation such as new nuclear and renewables, clarity on policy mechanisms and better education for customers that they will have to pay for low carbon generation.”
Tagged as: enrgy | fuel | carbon emissions | consumers
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