BEFORE and after the November Budget, the Office for Budget Responsibility forecast that green subsidies were set to increase our energy bills by £8.1billion a year by 2030, taking the total cost to £18.6billion.
However, the Daily Telegraph has discovered that tucked away in their small print, the OBR have admitted that this understates the likely eventual cost.
The Telegraph reports: ‘Households face paying billions more in energy bills to fund green subsidy costs that were not outlined in Rachel Reeves’s Budget . . . The Office for Budget Responsibility (OBR) revealed in its latest economic assessment that £1billion a year will be added to household energy bills to fund Ed Miliband’s next auction for renewables projects, known as “allocation round 7 (AR7)”.
‘Costs of the scheme were not outlined in the Chancellor’s Budget. Instead, they were revealed in a footnote to the OBR’s Fiscal Outlook report released on the same day. The revelation will cast doubt on Ms Reeves’s claims that Labour is bringing down the cost of living. It also comes amid a clash between the OBR and the Chancellor about whether she told the truth about the state of the public finances in the run-up to the Budget.’
Until the auction results are known, we cannot know what prices have been agreed. Nevertheless, the prices Ed Miliband has offered for the next tranche of offshore wind are double the cost of gas power, excluding carbon taxes. The £1billion quoted won’t be far off the mark.
Contract prices under what are known as Contracts for Difference are guaranteed and index-linked for 20 years. Consequently, these obscenely high prices will be baked in for years to come.
And that is not all that the OBR has not told us. Ofgem has just announced the first tranche of a £90billion investment in upgrading the electricity and gas grids. The full upgrade is planned to be complete by 2031.
Some £17.8 billion goes on gas pipelines, which seems strange given gas is supposedly going to be phased out soon. But most will go on the electricity transmission network. Hundreds of miles of pylons and cables will be constructed to bring wind power from Scotland and the North Sea to the parts of the country where it will be used. Storage projects will also have to be built to cope with the intermittency of wind and solar power. Transmission capacity will need to be expanded to meet increasing demand for electric cars and heat pumps.
Ofgem estimate that these upgrades will increase bills by £6billion a year. The National Grid is already in the middle of a £16billion upgrade due to be ready next year. The BBC also reported a year ago that a further £58billion would have to be spent on upgrades between 2031 and 2035. None of these upgrades would be necessary if it was not for Net Zero targets.
Ofgem have deceitfully claimed that these upgrades will eventually reduce bills by £80 a year. As the Telegraph reports: ‘Ofgem argues that, alongside maintaining grid resilience, these investment costs will ultimately deliver savings of around £80 on an average domestic bill. This will primarily be achieved through reduced reliance on foreign gas and decreasing payments to wind farms to switch off, otherwise known as “constraint costs”.’
Ofgem knows full well, or should do, that international gas prices are falling and gas power is now substantially cheaper than offshore wind. The OBR forecasts that gas prices will fall further in coming years.
Moreover, constraint payments will not decrease: they will rocket. With a tripling of wind and solar capacity, there will be many days when there is much more electricity being generated than is being used. No amount of new transmission lines will alter this fundamental, meteorological fact.
Besides, wind constraint payments cost only around £300million a year. Any savings on this bill will be tiny in comparison with costs already mentioned.
Ofgem chief Jonathan Brearley inadvertently gave the game away when he revealed the real reason for these upgrades: ‘This investment will support the transition to new forms of energy.’ It is nothing to do with saving people money; it is all about meeting Net Zero targets.
And it will cost all a fortune. Taking everything that has now been announced by the OBR and Ofgem, electricity bills will rise by 18 per cent over the next five years. This is on the assumption that wholesale prices remain the same and is before general inflation gets added on.
