Renewable Energy

Wednesday 8th December, 2010
Do you drink bottled water?

"I think bottled water is the most revealing substance for showing us how the global capitalist market works today," says Richard Wilk, professor of anthropology at Indiana University. "In a sense we're buying choice, we're buying freedom. That's the only thing that can explain why you would pay money for a bottle of something that you can otherwise get for free."

Whether you're buying Highland Spring from Scotland or Evian sourced in the French Alps, essentially you're paying through the nose for a free, natural, resource.

"We cannot lose sight of the ultimate absurdity of the bottle water industry," says Mr Wilk. "Here we have a world where people are dying of thirst, where people lack… the clean water to feed their children and we're spending billions of dollars and huge amounts of energy moving water from… people who already have it to other people who already have it."

Enter renewable energy - which is generated, with minimal environmental impact, from sources of energy such as the wind or the sun. Whilst traditional power stations run on increasingly expensive fossil fuels, like coal, oil or natural gas, the raw material for renewable energy is free. It doesn't need to be dug, pumped, piped or's just there, provided by nature.

So how much do "green" consumers pay for the privilege? Oddly enough, despite being made for free, renewable energy tariffs can cost, on average, around 10% more. Energy companies prey on ignorant consumers and, like car insurance providers, rely on the fact that most customers cannot be bothered to shop around. A couple in their 50s who have been signed up with British Gas for 30yrs, paying monthly by cheque, may one day decide to go eco and switch to a renewable energy tariff. For sure, a 10% increase for them may be about right. An eco advocate who has low energy light bulbs in every socket, a geothermal pump for hot water, solar panels on the roof and only needs an external supply for a top-up? Again, 10% may be about right but - for heavy consumers - the costs can be tremendously more. But why?

I contacted Green energy suppliers Good Energy and Ecotricity for an explanation. Ecotricity, despite promising feedback, changed their mind and decided not to send any - your guess is as good as mine - Good Energy did respond, however. Their PR, Sophy Fearnley-Whittingstall, told me - "We are often asked why it costs more to supply electricity from purely renewable sources (around £1 a week more for the average household). The answer is due to intrinsic differences between the way renewables are traded compared with fuel from conventional sources". Essentially, unlike a coal-fired power station that can just be run on demand, renewables are more complicated as it may not be windy or the sun may not be shining. This week, for example, snow may be covering solar panels on the roofs of many buildings - this reduces the amount of available "clean" energy, supply & demand then pushes up the prices.

But why does it cost more than electricity generated from fossil fuels? Is it the bottled water factor? Charging extra to consumers for what they feel is a better product. Does it really matter if it's only £1 extra a week? The problem is, it's a lot more than that.

I did some calculations using my latest energy bill, a combined Gas/Electricity tariff from E.On. Its total, for the 90 days to the end of September, was £197.23 - not cheap, by any means, but we do own a large four bedroom detached home. I took the unit calculations from the bill and applied these to the latest tariff from Good Energy. The result was a whopping 62% more, an increase of £123.79 for the renewable energy tariff. That's not £1/week more, that's £1.38/day. Basically, to switch from my E.On tariff to Good Energy is going to cost me around £40 per month extra. This was just based around the months July-September too. Once we'd changed the clocks and winter set in, we're going to use more energy which will cost even more on renewables.

We're in a world where energy costs are spiralling upwards, so badly that the Energy regulator, Ofgem, has had to conduct a price review. Energy companies blame the increase in wholesale energy charges for the price changes but the regulator claims that energy companies are now making £90 profit for each typical customer, compared with £65 just 3 months earlier - a 38% increase. Of course, these wholesale prices are based upon the increasing cost of oil, coal and natural gas, used for power generation - these don't apply to renewable energy tariffs.

I asked Good Energy for further explanation of why the renewable tariffs are so expensive. They carefully explained all the measures they take to ensure that they only ensure their customers are supplied with renewable energy. Other providers may "double count" their renewable energy which basically consists of exploiting a loophole in the system to sell the renewable energy units twice - once to households and once to businesses. Other energy companies may also subsidise their renewable schemes using profits from their "dirty" energy tariffs, making their prices look cheaper than those from Good Energy.

Ultimately, nobody answered my question. The price of fossil fuels keeps rising, passing on an equivalent increase to our gas and electric prices yet, despite massive price hikes in recent times, the price of renewable energy - made from free solar, wind or hydro sources - keeps staying ahead. Nobody can really explain how energy that appears to come from a cheaper source ends up costing more. In my opinion, it's because none of these providers are in this for the environment, it's all about money and paying the shareholders. If an energy company can sell its dirty energy units on the open market for 6 pence a unit, then those selling nice, clean, feel good energy are going to always command a premium for those units and sell them for maybe 8 or 9 pence. It doesn't matter what the true costs are, if they make a "better" product, they're going to charge a higher price for it.

With UK energy bills likely to rise again in the near future, do we expect renewables to finally become cheaper than their dirty equivalents? Not whilst people are still paying £1.14 for a 750ml bottle of "natural" water they won't.

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