Beware misinformation and propaganda about the cost of energy crisis

British consumers are facing a cost of energy crisis, and some ideological extremists are trying to exploit the hardship and misery with misinformation and propaganda about climate policies. Bob Ward dispels the four most common myths being propagated by opponents of net zero.

A rise in the energy price cap for gas and electricity on 1 April means that an average annual dual fuel bill has increased by nearly £700, according to the regulator, Ofgem. The root cause is the slow response of energy supply as economic demand has recovered from the effects of the COVID-19 pandemic, but concerns about energy security following Russia’s invasion of Ukraine are also exerting upward pressure on global prices.

A small group of MPs and campaign groups are attempting to mislead the public about the causes of this crisis as part of their efforts to thwart the Government’s climate policies, including those intended to achieve a cut in the UK’s annual emissions to net zero by 2050.

Here are four of the most common myths that are being peddled by the opponents of net zero, including the Net Zero Strategy Group, Net Zero Watch and the ‘Power Not Poverty’ campaign.

Myth 1: Renewables are forcing up energy bills

This is not true. Ofgem is unequivocal about the cause of the rise in dual fuel bills: the wholesale market price of natural gas has increased at least fourfold in the past 12 months. Its analysis shows that the average annual bill has risen £693 to £1,971, driven mainly by a surge of 104 per cent in wholesale costs from £528 to £1,077.

Opponents of UK climate policies have tried to blame the size of electricity bills on so-called ‘green levies’. In fact, social and environmental policies now account for £153, or 7.8 per cent, of an average annual dual fuel bill. This sum fell from £159 during winter 2021–22.

It should be noted that although these policies include subsidies for previous and current generations of renewable power, they also provide funding for the Warm Home Discount, designed to help pensioners and households on low incomes with the costs of heating, and the Energy Company Obligation, which provides assistance to poor households with insulation and energy efficiency measures.

In fact, renewables that are operating under Contracts for Difference have been generating electricity below the market rate since September 2021 and so have been paying back money to the Low Carbon Contracts Company.

Myth 2: Fracking in the UK would have lowered energy bills

This is false, too. Energy bills have risen because of steep increases in the market price of natural gas for European countries, as a result of shortfalls in supply which began in winter 2021–22. These shortfalls were due to many different factors, including repairs on gas infrastructure and higher gas use during 2021 as a result of lower than expected levels of wind power generation. Uncertainties and disruptions to gas supply arising from Russia’s invasion of Ukraine have further inflated market prices.

Some opponents of climate policies have suggested that shale gas from fracking in the UK could have reduced current energy bills. The UK Government announced a moratorium on fracking in November 2019 due to concerns about triggering tremors that could damage nearby buildings. However, even under the most optimistic projections[1] from United Kingdom Onshore Oil and Gas (UKOOG), the group representing the onshore oil and gas industry and the wider supply chain, even if the moratorium were not in place, in year three UK annual production of shale gas would be only about 57 billion cubic feet (1.6 billion cubic metres). According to the United States Energy Information Administration, the 27 Member States of the European Union and the UK together imported almost 9 billion cubic feet (0.25 billion cubic metres) per day of liquefied natural gas (LNG) in 2021. Thus, UK shale gas production would be replacing less than 2 per cent of annual LNG imports, and making no real impact on the European market price.

However, while it would not have lowered bills, UK shale gas could offer some economic benefits to the UK, such as lowering the balance of payments and creating local jobs. The UK Government has commissioned the British Geological Survey to review the evidence about whether fracking could be resumed safely.

Myth 3: More renewables means we have to use more natural gas, including imports from Russia

This is an inaccurate claim that is easily rebutted. Although renewable sources such as wind and solar are intermittent, and thus need to be backed up by other electricity sources such as gas-fired power stations, this does not negate the zero-carbon power that is generated. The latest statistics published by the UK Department for Business, Energy and Industrial Strategy show that in the last quarter of 2021, renewables generated 35.8 terawatt-hours of electricity, up 4.0 per cent compared with the same period in 2020, while natural gas generated 30.4 terawatt-hours, down 4.4 per cent compared with 12 months before. Wind and solar generated almost 25 per cent of the UK’s electricity in 2021.

Although imports of LNG from Russia increased by 37 per cent in 2021 compared with 2020, they still only provided 3.7 per cent of the total UK supply of natural gas. The British Energy Security Strategy published by the UK Government last week noted that the “growing proportion of our electricity coming from renewables reduces our exposure to volatile fossil fuel markets”. It committed the UK to “phase out the use of Russian oil and coal by the end of 2022, and end imports of Russian liquefied natural gas as soon as possible thereafter”.

Myth 4: The UK cannot afford to reach its target of net zero emissions by 2050

The evidence shows this is untrue. The UK Office for Budget Responsibility has examined in detail the size of the investments required for the UK to reach the statutory target of net-zero emissions of greenhouse gases by 2050. Its July 2021 Fiscal Risks report estimated, for the balanced pathway laid out by the Climate Change Committee (CCC), “the total net cost of abatement across all sectors of the economy between 2020 to 2050 at £321 billion – with £1,312 billion of investment costs mostly offset by £991 billion of net operating savings”. It also said “…net costs peak in 2027, when investment in power generation peaks and investment in buildings is ramping up. Net costs then fall steadily as operating savings from improved energy efficiency grow and running costs fall. From 2040 onwards, net operating savings are projected to outweigh investment costs.” By 2050, the net annual savings would be £19 billion.

Overall, the OBR’s report concluded:

“Between now and 2050, the fiscal costs of reducing net emissions to zero in the UK could be significant but not exceptional. The CCC puts the cumulative 30-year investment cost for the whole economy, plus the operating costs of removals, at £1.4 trillion in real terms, with our central variant assuming that the Government picks up around a quarter of that cost. When combined with savings from more energy-efficient buildings and vehicles, the net cost to the state is £344 billion in real terms. But spread across three decades, this represents an average of just 0.4 per cent of GDP in additional public spending each year.”

The OBR acknowledged that this calculation does not include the benefits of avoiding economic damage from climate change impacts, local air pollution and other consequences of fossil fuel use. The report states:

“The costs of failing to get climate change under control would be much larger than those of bringing emissions down to net zero. Our stylised unmitigated warming scenario shows debt spiralling up to around 290 per cent of GDP thanks to the cost of adapting to an ever hotter climate and of more frequent and more costly economic shocks (as the spillovers from increased conflict and mass migration are added to the cost of more extreme weather events). Viewing the costs of achieving net zero in this context, it is clear the net benefits of a successful global response would be huge.”

Although it is clear from this analysis that the UK can afford the transition to net zero emissions, the relative distribution of costs between consumers and businesses will still be important.

[1] See chart 6 on p13.