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Green policies to cut £166 off energy bills by 2020

By Katie Anderson on March 28, 2013

A study carried out by the Department of Energy and Climate Change (DECC) has revealed that only 11 per cent of domestic energy bills can be affected by state policy.

Following publication of the research, Secretary of State for Energy and Climate Change Ed Davey predicted that green policy would eventually save British households money. Energy and Climate Change Minister Greg Barker, meanwhile, told reporters that the Renewable Heat Incentive (RHI) would be delayed yet again.

DECC analysis shows that the average dual-fuel household energy bill of  £1,250 is largely at the mercy of market conditions. Gas and electricity tariffs, import costs, transmission charges and other such factors account for 85 per cent of the average bill.

Although the government can only control a small proportion of each bill, Davey believes green policy will at least provide some financial respite for struggling households in years to come. Exactly how much remains uncertain, but Davey predicts initiatives such as the Green Deal and RHI will shave £166 off energy bills by 2020.

Davey made clear that green policy could only achieve so much, however, as energy prices cannot be controlled by the government. Ofgem, the energy regulator, is empowered to ensure that the energy market in the UK is relatively competitive, but the government cannot do a great deal about wholesale prices or the amount of profit generated by suppliers.

The Energy Minister said: “The analysis shows that our strategy of shifting to alternatives like renewables and of being smarter with how we use energy is helping those who need it most to save money on their bills”.

Davey believes that the Green Deal, which provides finance for households who want to improve domestic energy efficiency by installing loft and cavity wall insulation, can help consumers now and in the future. The RHI, however, will not be made available until March next year.

Unfortunately, green policy, although capable of reducing an 11 per cent segment of household bills, is notoriously expensive to implement. In many cases, especially where government subsidies are concerned, the cost of investing in renewables is passed on to consumers by suppliers. Households might save £166 on bills in 2020, therefore, but at what cost?