Power mad: How green energy subsidies are going to cost you money

April 08, 2016 4:05 PM

We at the TaxPayers’ Alliance have long been critics of the Government’s green subsidies. Our position has always been the same: green energy subsidies push up the cost of already stretched families’ domestic energy bills. The cost of inefficient taxpayer-subsidised green programmes always ends up, one way or another, being passed on to the consumer. We’ve also worked hard in recent years to illustrate that the practice of government intervention in the energy market leads largely to only negative consequences.

So it wasn’t particularly surprising when we read in The Telegraph this morning that Britain is likely to have a surplus of electricity heading for the grid this summer, leading the National Grid to warn it could be forced to issue emergency orders for power plants to switch off. They also fear they may have to pay businesses to shift their high usage demand to times when there’s a surplus.

But surely a surplus of electricity is good, right? Well not really, no. Unlike other forms of energy like gas or oil, electricity can’t be stored in large quantities. The process of managing an energy grid like the UK’s is a delicate balancing act which relies on market forces to respond to the supply and demand pull of the power network. Largely the grid manages itself – after all, why would power plants generate electricity if no households wanted to buy it? According to the National Grid, about one per cent of the average domestic electricity bill goes towards paying for the costs of balancing the network – but with such oversupply imminent, these costs are projected to rise.

What is threatening to change this is the constant oversupply of renewable energy to the market. Such has been the growth in solar panel and wind farm usage that the grid is struggling to cope. For when say, Mr Smith, adds solar panels to his roof, those solar panels will constantly generate electricity, the excess of which will be put back into the grid. In some cases, the panels and turbines feed the electricity directly into the grid. This problem is exacerbated by poor power cable connections, meaning that the surplus electricity cannot reach the areas where it’s actually needed.

Government green energy subsidies such as the Feed-in Tariff, which provides taxpayer-funded payments even if the owner of the source consumes the renewably produced energy himself, only succeed in incentivising this overburdening, hugely increasing supply in the face of lack of demand. Indeed Jon Ferris, of the Utilitywise energy consultancy, said “the energy system has grown without strategic planning….We have too much inflexible generation for summer demand, [and] dangerously little flexible generation for winter demand.”

So perhaps in future if the Government wants to help it can leave the markets to do what they do best.

Latest Blogs:

Working for the taxman

6:00 AM 26, Nov 2016 Harry Fairhead

Further thoughts on the Autumn Statement

4:56 PM 24, Nov 2016 James Price

Launch a War on Waste and simplify taxes

9:45 AM 23, Nov 2016 The TaxPayers...

Reforming capital taxes

6:00 AM 19, Nov 2016 Harry Fairhead