Supplementary memorandum by Sir Donald
Miller
1. Since submitting my evidence I have studied
the BERR Consultation Document on a proposed Policy for CO2 reductions
using Renewable Energy. This substantially increases the target
proportions of electricity from renewable energy from some 15%
by 2020 to 35% and would clearly have significant implications
for the costs of electricity to consumers. I have therefore carried
out a quantitative assessment of its implications which I trust
will be of interest to the Committee.
2. Para 74 of the Consultation document
states that electricity tariffs for domestic consumers are currently
increased by 7% from renewables and suggests that costs will increase
by a further 10-13% if 35% of our electricity comes from renewables
by 2020. This would mean a total addition to domestic tariffs
of some 20% and rather higher for industrial.
3. For year 2006, the base year for the
Consultation Document, 4.4% of our electricity was from renewables;
however les than half of this (some 2%) was from sources qualifying
for ROC subsidies, the remainder being low cost old established
hydro generation and similar non CO2 emitting generation. The
35% target for year 2020 therefore implies a 17fold increase in
subsidised renewables making it difficult to reconcile with the
claimed three fold increase in tariffs for consumers.
4. The assessment I have carried out suggests
that the 20% increase is a gross underestimate and that the true
figure, based on median projections, would be in the region of
a 50 % increase. In view of the importance of this and the need
to validate the assumptions I have asked Mr Colin Gibson, formerly
Director of Networks at National Grid, and who I see has also
submitted evidence to the Inquiry, to carry out an independent
check and this has confirmed that the true figure is likely to
be in excess of 50%.
5. In view of the enormous cost of this
proposed policy and the damage it would do to the UK economy,
I believe that work should begin immediately on developing an
alternative energy policy which will be more effective and acceptable
to electricity consumers. With the proper measures in place this
could be put into effect more quickly and with greater certainty
of meeting the planned CO2 reductions than with the proposals
in the Consultative Document.
19 July 2008
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