The Economics of Renewable Energy - Economic Affairs Committee - Contents



1.  The Government is committed to a substantial increase in renewable energy over the next decade as a major part of its programme to reduce carbon emissions. Currently 1.8% of energy used in Britain comes from renewable sources—the Government aims to increase this to 15% by 2020 in line with European Commission proposals.[1] Greater use of renewables is expected to increase energy costs. But the cost of non-renewable sources of energy can also rise as recent volatility of oil and gas prices shows.

2.  We decided it would be timely to examine the economics of renewable energy. The Committee's starting point is the Government's wish to reduce carbon emissions—this report does not discuss whether or how far it is necessary to do so. An earlier report by the Committee on climate change examined the issue in 2005.[2]

3.  Chapter 2 gives a brief overview of Britain's energy system and outlines the Government's energy policy objectives.

4.  Chapter 3 examines the different renewable technologies used to generate electricity. Electricity generation is often cited as the sector with the most potential for increasing the use of renewable sources, although it represents only around 20% of UK final energy consumption. The chapter compares the generation costs from different renewable sources with each other and contrasts them with fossil fuel-fired plants and nuclear power.

5.  In Chapter 4, we move from power generation to the electricity system as a whole. We explore the issues involved in balancing the irregular supply from renewable generators which depend on weather conditions against the continuous demand for electricity. We examine the costs of connecting renewable generators to the electricity grid which carries power to homes and businesses across the country.

6.  In Chapter 5, we examine the potential for renewable sources of heat and of transport fuels—areas often overlooked, although they represent roughly 80% of UK energy consumption. We look at the options in these sectors and compare the costs to those of renewable electricity generation.

7.  Chapter 6 looks at the key policy issues surrounding renewable energy, such as how much support, and of what kind, the sector should get. We consider the impact of renewable policy on fuel poverty, the planning system for renewable energy, and whether the 15% target proposed by the European Commission is achievable.

8.  To keep the scope of this report manageable, we decided not to cover energy efficiency. It remains the case, however, that improvements to the way in which we use energy may be among the most cost-effective ways to reduce carbon emissions. We emphasise that nothing in this Report should be taken to imply that we do not recognise the critical importance of energy efficiency measures.

9.  The geographical focus of the Report is the UK and the EU. The electricity system in Northern Ireland is run separately from that in Great Britain; almost all the evidence we received related to the system in Great Britain. As witnesses noted, the impact on carbon emissions of measures taken in the UK on its own (or, indeed, even in Europe as a whole) is likely to be minimal unless similar policies are adopted elsewhere.

1   The European Commission has set a binding target that 20% of the EU's energy consumption must come from renewable sources by 2020. However, the individual member states' contributions to this target are still only proposals and are a matter of dispute. For the United Kingdom, the European Commission has proposed that 15% of its energy come from renewable sources. Back

2   House of Lords Select Committee on Economic Affairs, 2nd Report (2005-06), The Economics of Climate Change, (HL 12) Back

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