The rising cost of fuel is plunging
millions more into fuel poverty following another year of inflation-busting
price hikes by all the six-major energy companies. Targets to eradicate fuel
poverty by 2016 are going to be missed, and government policy is making matters
worse. This overview draws together information in multiple areas attached to
fuel poverty in order to see why fuel poverty is happening, and what can be
done to prevent it taking place in the future.
By Andrew Robertson for Social Investigations
Index
1. Statistics
2. Road Map
3. Future Fuel
costs
4. Retrofitting
5. New builds
– Code for sustainable housing/Passivhaus
6. Privatisation
7. Reserves
8. Fracking
9. Renewable
targets
10.
Fuel
poverty – the facts
In 2004 the Labour government produced a report titled ‘Fuel
Poverty in England: The Government’s Plan for Action.’ In it they said ‘as far as reasonably practicable,
(we) will seek an end to fuel poverty in vulnerable households by 2010...Fuel
poverty in other households will also be tackled…with a target that by 22
November 2016, as far as is reasonably practicable, no person in England should
have to live in fuel poverty.’ So what went wrong? How did we go from 2.5
million in fuel poverty in 2005 to 6.5 million in such a short period of time?
1. The statistics – rising
numbers in fuel poverty
One of the main reasons for the rapid growth in fuel poverty
has undoubtedly been the unprecedented 125 percent rise in
energy prices that has taken place since 2003. On average, domestic dual fuel bills (gas
and electricity) have increased from £572 annually to £1,287 between January
2003 and September 2008. The latest price increases by all six big energy
companies have seen fuel bills rise by an average of 12.44% in 2011 with
Scottish power heading the list with a projected £1,391 annual bill, a rise of
14.86%, which is a clear 10% rise above inflation. The charity National Energy
Action (NEA) estimates that for every 1% increase in price there is a corresponding 60,000
people pushed into fuel poverty, which has led the NEA
to suggest the real number now in fuel poverty to be 6.5 million.
Fuel poverty figures are calculated
across two years, which means price and income changes for two years need to be
considered when looking at the current data. Some price rises will impact on households in the latter half of
2011, but it will be 2012 before the full impact of these latest price hikes
are visible in the fuel poverty data. If price rises continue as predicted, by
2012
a further million may be added to this number.
The
latest statistics from the Department for Energy & Climate Change show that
in 2009, there were around 5.5
million fuel poor households in the UK, an increase of 1 million in 2008. In
England, this figure is around 4.0 million, up from 3.3 million in 2008. The
increase between 2008 and 2009 has largely been due to rising fuel prices. Gas
prices rose by 14 per cent, and electricity prices by 5 per cent, between 2008
and 2009. Fuel poverty amongst vulnerable households for 2009 stood at 4.5
million households (UK), up 0.75 million from 2008, and 3.2 million households
(England), up 0.5 million from 2008.
· A vulnerable household is one that contains the elderly, children
or somebody who is disabled or long term sick.
· The definition of households in fuel poverty is where more than
10% of income has to be spent on fuel for adequate heating. Usually 21 °C for
the main living area and 18 °C for other occupied rooms
2. Fuel Poverty Road Map
This situation led for calls by the
Fuel Poverty Advisory Group (FPAG) to call for a ‘Fuel Poverty Road Map’ to
tackle the problem. Established in 2002 and a Non-Departmental Body now
sponsored by the Department of Energy & Climate Change (DECC), one of the roles of the FPAG is
to ‘consider and report on the effectiveness of the current policies in
delivering reductions in fuel poverty and the case for greater coordination.’
Faced with these dramatic increases in fuel bills, the FPAG in its 2008 7th
Annual Report made a recommendation that ‘as a matter of urgency the DECC
should prepare a ‘Road Map’ with milestones and ownership of the key tasks
required to eradicate fuel poverty by 2016. The FPAG wants the road map to be
developed through to 2020 and include the implications of climate change and
carbon reduction targets and policies. In addition, as well as improving the
English housing stock to a specific level of energy efficiency, the government
should also ’aim to bring all housing stock up to standards of homes built
today.’ The calls for the ‘Road Map’ were ignored. Exasperated by this, the
FPAG repeated the call for it in their following annual report, asking the
simple question: ‘Where is the road map?’
In a House of Commons Energy and
Climate Change Session in 2009-2010, the issue of the road Map was raised,
however the Former MP and then Labour Energy minister David Kidney denied the
road map would be of any use, “it is very difficult to set out a road map with
milestones that is meaningful. For example, we did a great job from when the
Fuel Poverty Strategy was published in 2001 to 2004, following a good set of
policies and making huge progress in reducing fuel poverty, and then came along
those four years of huge price rises which nothing in our plans could have
prevented and it is they that have blown us so badly off course in meeting our
targets.” He concluded: ‘There is a limit to how much we can anticipate and
plan for those kinds of events.” However the committee were unconvinced, ‘We
accept that large price increases have made it very difficult to hit the 2010
target, but the absence of a road map towards that target has been a
contributory factor. The Government should not repeat that mistake with the
2016 target and must produce a road map as soon as possible.’
The demand for a road map has
continued and the latest call for it came from the All Parliamentary Fuel
Poverty & Energy Efficiency Group (FPEEG) Inquiry into Social Justice in
the Low Carbon Economy in a report published in May 2011. In it they said: ‘We accept that, as a result
of the complex interaction of incomes, energy prices and energy efficiency,
reducing fuel poverty is a difficult task; but that simply strengthens the case
for a road map.’ In addition the report asked; ‘what is going to happen if (the)
milestones are not reached? Caroline Lucas the Green Party Leader and Co-chair
of (FPEEG) expressed the need of collaboration across multiple government
departments was required: ‘All relevant Government Departments should be
involved in developing, funding and implementing this fuel poverty programme
including HM Treasury, the Department of Energy and Climate Change, the
Department for Communities and Local Government, the Department of Health and
the Department for Work and Pensions.’
In October 2011, the DECC
released an interim report chaired by Professor John Hills titled Fuel Poverty: The problem and its
measurement. The full report due out early next year, has been heavily
criticised by Ms Lucas who has questioned its very function: ‘The terms of
reference for the review do not
include the necessity to update an effective strategy for meeting the targets’,
she continued, ‘the Government’s refusal to acknowledge calls thus far to
devise a road map constitutes an utter lack of political will and ambition to
meet the 2016 targets to eradicate fuel poverty. They are currently only
committed to the UK fuel poverty strategy 2001 which includes the duty to
conduct an annual review. So we have been left in a situation where
conducting a review for review’s sake has unfortunately let them off the hook.’
Indeed, the interim review has made an initial proposal to simply change the
definition of fuel poverty, which if implemented will halve the numbers of
households defined as being in fuel poverty without having to insulate a single
home.
3. Predicting future fuel costs
In
a consultation named the ‘Project Discovery: Energy Market Scenarios’, the energy
regulator Ofgem’s Project
Discovery which began in early 2009 described
four possible future scenarios for the next decade and beyond, looking at current market
arrangements and their capability of delivering secure and sustainable energy
supplies. Each scenario showed that energy supplies can be maintained, but the
analysis exposed real risks to supplies, potential price rises and varying
carbon impacts. The report highlighted the high levels of investment likely to
be needed to secure energy supplies and meet the government’s target to reduce greenhouse
gas emissions by 34% by 2020: ‘Up to £200 billion may be required
over the next 10-15 years. This would more than double the recent rate of
investment.’ For consumers the future costs look bleak as the cost of domestic
bills in all four scenarios are due to increase; especially so if oil and gas
prices continue their underlying rise since 2003.
However the DECC in a publication produced in July 2010 titled:
‘Estimated impacts of energy and climate change policies on energy prices and
bills’, predicted ‘domestic
energy bills will only be 1% higher in 2020…as a result of climate change and energy
policies.’ The reason for such a small percentage rise was on the assumption the
amount of energy we use will be less thanks to the policy of improved
insulation and renewables: However as we have seen, despite there being
policies in place the targets for removing fuel poverty by 2016 will not be met
and with no road map in place, there is no guarantee customers will be as
protected by only 1% by 2020. In reality, a
typical dual-fuel energy bill could go up from around £1,200 per annum in 2009
to between £1,300 and £1,800 (at 2009 prices) by 2020. The Scottish power bill
is currently £1,391 and has therefore already reached the Ofgem discovery predictions
ten years ahead of time.
4. Retrofitting
The only long-term and sustainable
solution for dealing with fuel poverty according to the Fuel Poverty Action
Group in their 2009 8th annual report; is ‘to radically improve the energy efficiency of every dwelling
occupied by fuel poor households.’ In an attempt to tackle fuel poverty, the Labour
government introduced the Warm Front Scheme (WFS) in 2000 to provide a range of heating and
insulation measures to vulnerable private sector households. In a period between June 2005 and March 2008, and at a cost of
£852 million, the WFS assisted over 635,000 households. Buoyed by this
progress, the Labour government raised the budget for the next 3 years to £859
million.
There were however criticisms leveled at scheme, which included helping out
homes who didn’t need the support. According to a National Audit Office report
looking into the WFS, ‘nearly
75 per cent of households who qualified were not necessarily in fuel poverty.’
Seeing a fault in the scheme, the charity National Energy Action set up a
project named the Warm Zones project, which targeted specific geographic areas
with fuel poor households. This different approach however duplicated the
effort between the Scheme and the Warm Zones project, which offered some of the
same measures that the Scheme provided. The need for a more collaborative
approach appeared clear.
A new government brings new ideas.
However, any benefits the Warm Front Scheme made have in some cases been
entirely wiped out when the Coalition chancellor George Osbourne chose to cut
the winter fuel allowance in half. Not content with making winter as difficult
as possible for the poor and vulnerable, the government chose to phase the Warm
Front Scheme out by 2013 leaving the UK without a central government-funded
energy efficiency programme.
Presently there is a state of limbo
with a Pay As You Save scheme under the title ‘Green Deal’ is not due to start
until 2012. The idea of this new scheme will be to convince homeowners to take
out a loan and repay it through the money saved on the heating bills. In the leaked letter to the Telegraph
from Cameron’s energy advisors, this very issue was raised: ‘We believe a large number of measures will
need to be subsidised given, the hassle factor and other barriers to consumer
uptake identified at the Green Deal implementation meeting.’ The loans will be taken out through
commercial companies with repayment made over a period of 20 to 25 years in installments via the household's
energy bills. In addition these loans will have
interest rates attached to them, and as of yet who will be loaning and under
what conditions remains unclear. There are also real doubts as to whether
people will want to take up the offer and essentially land themselves into a
20-year debt. When homeowners choose to move house, the loan will be tied in
with the house. The purchasers would take on that loan as part of the house.
According to the government, this would make the new home more attractive because
they would know they are moving into a house that will have lower fuel bills.
However, Consumer
Focus a charity statutory consumer body for England, Wales, Scotland asked
homebuyers how they would react to a Green Deal loan sitting on a property they
were looking to buy. Both buyers and tenants said that could ‘put them off
choosing that property.’ In addition, there are currently 2.5m people already in debt to their
energy supplier, and the depth of debt is rapidly increasing, the idea that the
poorest will want to receive more debt is questionable, and will existing
defaulters be allowed to receive a loan on the green deal?
According to the Inquiry into Social
Justice in the Low Carbon Economy report: ‘Funding these policies
through levies on consumer bills is demonstrably regressive and perverse’,
because ‘The poor spend proportionately more
of their income on fuel than more affluent consumers.’ The
report concludes that the eradication of fuel poverty is best achieved by
funding programmes through HM treasury in a joined up approach. ‘This is generally accepted to be a more equitable
and progressive approach.’ The UK has the highest
winter death rate in northern Europe; worse than much colder countries such as
Finland and Sweden. In
2009/10, nine elderly people died every hour from cold-related illnesses,
resulting in an
estimated 25,400 excess winter deaths. However, it must be noted that the
claim that people in Sweden uses less energy
than in the UK is not true. Either way, it is hard to imagine elderly
homeowners wanting to take on a debt in late life to improve their heating
and therefore the most vulnerable people affected by fuel poverty, are those
who are least likely to
adopt the scheme.
Further
concern has focused on the way the scheme presents an opportunity for utility companies to
get back a lot of the money that was levied on them to improve energy
efficiency in the first place. For example, under the Carbon Emissions Reduction
Target, utility companies have paid into a fund for energy-efficient home improvements. Under the Green Deal, they are the companies doing much
of the retrofitting, and will be given a green light to get this money back at
a profit.
5. New standards to a warmer future
In 2006, a 700-page report compiled by Sir Nicholas Stern for the UK
government named the ‘Stern review’, informed us that the world has to ‘act now
on climate change or face devastating economic consequences.’ In amongst the vast document, it highlighted how ‘In 2004, more than a quarter of the
UK’s carbon dioxide emissions – a major cause of climate change – came from the
energy we use to heat, light and run our homes.’ This provoked the then Labour
government to introduce a voluntary new rating system for new builds called the
‘Code for Sustainable Homes’ (CSH).
How the
Code for Sustainable Homes works?
New design
drawings and specifications for houses for the planned house are assessed and
points awarded out of a total of 100 points, based on a percentage system) in
nine design categories: Level 1 requires 36 points; Level 2 – 48
points; Level 3 – 57; Level 4 – 68; Level 5 – 84; and Level
6 – 90.
The categories are:
1.
Energy
and CO2 Emissions
2.
Water
3.
Materials
4.
Surface
Water Run-off
5.
Waste
6.
Pollution
7.
Health
and Well-being
8.
Management
9.
Ecology
These nine categories break down into two
groups: ‘Mandatory’, and what can be called ‘Other’. The Mandatory elements are
Energy and Water. Within the ‘Other’ group is a subgroup comprising Surface
Water Run-off, Waste, and Materials, where minimum standards must still be met.
This rating system takes into account the
sustainability of the ‘whole home’ as a complete package, a departure from
previous methods.
The mandatory level is 3. However within this,
the mandatory elements account for only 10.3 points. The other 46.7 points come
from the other groupings, leaving the code open to manipulation. Some
organisations in the industry have openly provided a guide to highlight how
best to achieve the mandatory level with minimal effort. One such website
www.Homebuilding.co.uk provides a page with a section titled ‘How to work the
CSH’. It reminds readers that the CSH assessment is carried out at the design
stage, prior to construction, and advises that it is ‘design that is the key’.
Perhaps most worrying is the acknowledgement that ‘there are some fairly soft
targets in that group...it is possible to gain half the needed 46.7 points with
little impact — simply by making those small, cheap changes to the design and
correctly labelling things to bring them to the CSH assessor’s attention.’ In England the official Government target was for all new
homes to be built to comply with the energy component of Code Level 3 in 2010,
then future demands are to be Code Level 4 in 2013 and Code Level 6 in 2016.
The CSH has generally been seen as a positive
driving force towards improving both carbon reduction in new builds and
reducing fuel use through better insulation and lower running costs. The generally strict targets imposed by
the Code are bringing the quality up to that of Northern Europe and it makes it
extremely unlikely that anyone living in properties built according to its
standards will fall into fuel poverty.
Passivhaus
The ultimate warm house is one that
barely requires any heating applications at all, and luckily for us it is
already here, but currently barely used in the UK. Passivhaus or ‘Passive house’ is the fastest
growing low energy design standard in the world with over 30,000 buildings
realised to date. Originally developed in Germany over a decade ago Passivhaus
buildings dramatically reduce the requirement for internal ‘space heating and
cooling’ without the need for heating to such an extent that in some residential buildings only a
heated towel rail is required as a means of conventional heating. The emphasis is on super-insulation and stringent
levels that create of airtightness and are designed to optimise heat from the
sun. Not only that, this heat can then be recovered and
circulated by a Mechanical Ventilation system and Heat Recovery (MVHR) unit and
used for other purposes. In short Passivhaus buildings can help eradicate the risk of fuel poverty,
reduce excess winter death rates and increase fuel security. In a new build
passive house you can expect your fuel bill to be around £50 a quarter. This
success has led many to see Passivhaus standard as the best way forward.
In the UK, the London council of Camden
is leading the way by building the UK’s largest Passivhaus scheme. The £10
million 55-home project is
due for completion in 2013, and could be just the beginning of a zero carbon
housing revolution. According to the European commission Intelligent Energy Europe programme
in its report ‘Promotion of European Passive Houses’ in 2006 – ‘The expected
penetration of Passive housing into the new-build housing market by 2020 is 50%
for Germany, and 20% for Austria, Belgium, Denmark, Finland, Ireland, the
Netherlands, Norway and the UK.’ The only downside is that on average, passive houses cost 14% more
upfront than conventional buildings, but the cost of energy is so low, you can
expect to retrieve this back in just 14 years. The larger problem with moving
towards PassivHaus according to the ecologist magazine will be the lack of a publicly funded body to promote best
practice in construction in the UK since the privatisation of the Building Research
Establishment, and according to the ‘Government’s Code for Sustainable Homes has gone in a different
direction (with a focus on renewables).’ However, a self-funded test
conducted by Richard
Hodkinson of Richard Hodkinson Consultancy – showed that despite the better fuel
efficiency achieved by Passivhaus standards, the houses built would not reach
even the level 3 standard of the CSH code, revealing an overall flaw in the CSH
grading system.
6. Privatisation
‘Whatever else privatisation has
done, it has done little for the consumer, at least in the case of the
electricity and resource industries. The City has done well out of the sales of
shares. The users have been bribed with the offer of cut-price shares. The
management has been bought off with huge pay rises and substantial share
options. (The present chairman of British Gas earns as much in a year as his
predecessor did in his entire career of building up the industry)…Privatisation
of British Gas has been a scandal. As a nationalised industry, it had converted
the entire country to natural gas and revolutionized the energy scene. As a privatized
company, it has done little more than sit back and reward itself and its
advisers from the benefits of former investments and its dominant position.’ Adrian Hamilton formerly of the
Institute of Economic Affairs – Observer January 2nd 1994.
If Privatisation was introduced to improve the bill for
the consumer, it has failed. Price increases have consistently risen above
inflation with future cost predictions all pointing towards continued
increases. In addition the competition, a key component of any privatisation
model no longer exists. The ‘big six’ as the main energy companies are known,
control 99.9% of the energy market. Recognising this as a problem, Chris Huhne
announced at the September 2011 Liberal Democrat conference in Birmingham how
he wanted ‘get tough on the ‘big six’ energy companies to ensure
that consumers get the best possible deal.’ One such ‘get tough’ measure was to
make the tariff system easier, making them easier to understand by having less
options and making it easier to switch.
A recent consumer research programme conducted by Ofgem,
found that 85 percent of consumers asked to find the cheapest
deal in less than a minute when using an Ofgem single tariff system, were able
to do so. However many of the elderly who will be the most likely
to be ill-affected by fuel poverty, will have no internet access, and won’t be
able to get involved in the hunt for the best bargains. Elderly support groups will need to assist in
researching the best price for them and helping them switch, when the onus
should surely be on the energy company to provide the lowest possible tariff
automatically. There is evidence that the bills people pay are being
manipulated. A common complaint is that cheaper deals are being made available
to attract new custom, while existing customers are not being told about the
available cheaper tariffs. Even if you phone instead, then you are still likely
to be misled. Research by Which? has shown that if a customer calls to change tariff
they will often be told incorrect information. On average one third of calls
made by Which?
requesting energy providers cheapest tariff were given not only wrong
information but quoted higher tariffs. It appears energy companies are willing
to deceive their customers because they know they have little choice. In addition, if all the six energy companies work
in tandem when increasing their latest price increases, as they always do, then
this policy will be largely negated. One of Ofgem’s role as industry regulator is to ensure that the market works
in the interests of energy consumers, but it has been accused of being
toothless for allowing the complicated array of tariffs to exist. Chris
Huhne has promised to give Ofgem more power. The Labour party opposition
leader, Ed Milliband suggested savings can be made for ‘80% of users’ by
pooling all energy centrally making tariff choices simpler, though as we have
seen through Ofgem’s ‘Project Discovery’, the overall prices are going to rise
in the long-term regardless of either of these policies. Making tariff’s
simpler is a welcome step, though will always be a sticking plaster on a broken
leg.
Friends of the Earth have claimed
that the gas producing companies are lobbying governments throughout Europe
including the UK, in order to ensure energy consumption continues from gas
power plants rather than from renewable energy. The Guardian reported
in April this year how a high level meeting was hosted by the president of the European
parliament ‘for the gas industry with VIP guests including the EU's energy
chief, Günther
Oettinger.’ This meeting is certainly not alone and represented only
the ‘latest in a long round of meetings in recent months between gas lobbyists
and senior officials in Brussels, including other EU commissioners and
prominent MEPs, as part of the industry's charm offensive.’
One of the consistent reasons put
forward by the energy companies for the price increases has been the cost of
wholesale prices. Wholesale
energy costs make up around half of household energy bills today. Both
wholesale gas and electricity costs are largely driven by gas prices set in
international markets.
However according to Ofgem in a ‘Retail Markets:
review and remedies’ report in March 2011, it stated: ‘The price which energy suppliers pay
for gas and power in the wholesale markets, and how this translates into the
price they charge to retail consumers, is not transparent. This threatens to
reduce public confidence in the market and its fairness; they added: ‘…Ofgem has
found for the first time that there is evidence that the big six suppliers have
adjusted prices in response to rising costs more quickly than they reduced them
when costs fell.’ This behaviour led Ofgem to conclude that had suppliers held
off their winter price increases, the consumers would have been £250 better
off. The companies have received no action against them for this nor been
fined.
There is more. A further method of
gaining profit that isn’t passed down to the customer was mentioned in the leaked
letter to the Telegraph from David Cameron’s advisors which stated; ‘its possible that higher margins are hidden through
transfer pricing, for example opaque contracts between suppliers’ generation
and retail arms generation and retail arms. It continued: ‘EON, RWE and EDF
reported negative margins in their domestic supply business in 2009 but they
did not make a loss across the whole value chain. Ofgem's accountants are
investigating.’
Transfer Pricing is a method of accounting that
happens whenever two related companies – that is, a parent company and a
subsidiary, or two subsidiaries controlled by a common parent – trade with each
other. This is as the tax justice network explain on their website ‘not, in
itself, illegal or abusive. What is illegal or abusive is transfer mispricing.’
For example if a company called ‘X’ has a distribution wing that buys gas in at
£5 per unit, and ‘sells’ that gas to the retail gas supplier for £20. This
means that the retail gas supplier can say it costs them £20, and therefore it
can ‘justify’ raising it’s prices above £20 even though it is one and the same
company that has risen the price. It is estimated that about 60 percent of
international trade happens within, rather than between, multinationals.
Profits
The
profits of each company were recently announced to Ofgem and raise more
questions than answers. The disclosure in most cases show relatively low
profits on massive revenue, showing what a tight margin the companies work in.
Figures released in the industry’s Oil and Gas 2010 economic report reveal how
total exploration costs for exploration, developments and operations came to
£12.3 billion.
·
RWE npower, made £14m
in profit on revenue of £6.2bn.
·
Scottish Power made
£82m on revenue of £3.5bn
·
EDF said it made a £92m
profit on a turnover of £6.3bn.
·
E.ON managed to make a
£226m profit on revenue of £6.6bn.
·
Centrica - annual
report shows profits of almost £1bn from supply on revenue of £11.2bn.
·
Scottish and Southern -
Adjusted
profit before tax was around £287 million.
Ofgem
have appointed a specialist accounting team to look into how the big six energy
companies calculate their profits, the report is expected by the end of the
year.
7. Reserves
Based on
the Department for Energy and Climate Change’s latest figures, Oil and Gas UK
the leading industry representative body estimates the UK reserves have
somewhere between 15 and 24 billion boe still to be recovered. (boe = barrel of
oil equivalent: this includes oil, gas and other hydrocarbons and equates all
of these with oil so that a common measure can be made). This amount however
includes the wide range of proven, probable and possible. The 24 billion is the
top mark and would rely on new technological projects untried in open water, as
well as hoping possible wells are in fact wells. However, just because new
technology allows for new fields to be opened doesn’t necessarily mean that
they should. Regardless of whether the maximum extraction figure can be
reached, the oil and gas reserves in the world are finite. Peak oil is often
talked about in past terms, although new technology continues to allow for new
wells to be reached. These new areas however are in increasingly challenging
areas and more costly to extract.
As reserves
become scarce the battle to control them continues; wars are fought over oil;
dictators supported to ensure its flow. According to Freedom House the
independent watchdog organisation that monitors countries freedoms, ten of the 21 countries rated worst for their
lack of respect for human rights are oil producers.
A move away from such dependence is in the long
run essential for any hope of world peace and in any case is inevitable as
reserves become depleted. Peak oil in the UK is said to have been reached by
1999, according to the global research organisation Worldwatch Institute, and
only a few oil fields in the world have yet to peak. They are Iraq, Kuwait and
Saudi Arabia. Our reliance on Oil and Gas in the UK however is massive both in
terms of energy requirements and income for the treasury. Currently Oil and Gas
provide some 75% of the UK’s total primary energy. Taxation on production
amounts to between 50% and 75% depending on the field. The industry paid £6.4
billion in corporate taxes in 2009-10, almost 20% of total corporation taxes
received by the exchequer. However, although this figure appears high, the UK
government’s tax take from oil and gas production fell to its lowest ever level
in 2009 according to government data published on the 24th March 2010. The £6.4
billion return amounted to less than half the tax income of the previous year,
during which oil prices hit their record high. One of the reasons for this
lower income was a rapid decline in output
from aging UK oil fields and highlights the urgency with which alternative and
sustainable sources must be found for our energy needs. Although the tax income
is likely to increase next year, the latest stock market analysis of UK oil,
has labeled it as ’weak’.
8. Fracking
The search
for more reserves is not contained to just offshore drilling, and has led to
the hugely controversial method known as Hydraulic Fracturing or Fracking as it
is sometimes called. Fracking
is the process of extracting shale gas, or coal bed methane, from underground
by hydraulic fracture of the strata containing the gas. Water, sand and a
cocktail of chemicals are injected at high pressure to create cracks in the
rocks underground to allow the gas to escape. In the US, explosions, spills,
and toxic pollution of air and water have been reported to the authorities, and
there have been calls to outlaw the practice made around the world. Lancashire
has become the centre for the controversy after UK mining company Cuardrilla
Resources claimed there was ‘enough gas…discovered beneath the soils of Lancashire to power
the UK for 66 years.’ The amount has yet to be independently verified and for
the moment the process has been halted, following two minor earthquakes that
have been blamed on the fracking activity. Earthquakes are not the only
concern.
The
Tyndall Centre at the University of Manchester reviewed the impacts of fracking in the only country which has so far been commercially
exploited, the United States. George Monbiot noted in the Guardian
how ‘using data on the chemicals being stored by these companies, the Tyndall
Centre was able to identify at least some of the substances being injected into
the rocks. He continued: ‘Of 260 chemicals, it finds that 58 give rise to
concern. Some are known carcinogens, some are suspected carcinogens, some are
toxic to people, some are toxic to aquatic life, some are mutagenic (which
means they can cause genetic defects) and some have reproductive effects.’ Both
the fracking fluids and the flowback fluids can contaminate water either
through the cracks forced open in the rocks by the fracking process, or through
drilling bores through aquifers. Climate camp protesters are now near one of
the three sites near Preston where exploratory drilling continues to take
place. The process has been widely condemned by the
Green party who called for a Moratorium on its use at their 2011 conference in
Sheffield. The search for energy of course remains vital, though such methods
are of high concern, and it is surely wiser to seek other more sustainable
methods. Perhaps we are better off looking towards Sweden who are ambitiously
aiming to be an oil-free
economy by 2020 without building any nuclear plants. In 2003, 26% of all energy consumed came from
renewables, compared with an EU average of 6%.
9. Renewable targets
In January 2008 the European Commission
published the 20 20 by 2020 package. This package commits EU members to
increasing the proportion of all final energy consumption (including heating,
transport and electricity) derived from renewable sources to 20% by 2020. The
renewables Directive seeks to address “the dual objective of increased security
of supply and reduced greenhouse gas emissions”.
Currently oil, and gas provide 75% of
all energy and even if the commitment is reached, which there is considerable
doubt in the economic climate, then it is still likely Oil and Gas will be
providing 70% by 2020. Almost all transport relies on Oil and most heat relies
on gas (Approx 80% of British homes). The main instrument for reaching the
renewable targets by 2020 will be wind power and in particular, offshore wind
power. The plan in the UK Low Carbon Transition Plan is to spend approximately
£100 billion developing 25 Gigawatts (GW) of capacity in nine zones:
· 5 in the North Sea
· 2 in the English Channel
· 1 in the Bristol Channel
· 1 in the Irish Sea
In addition to the 2020 package, the Climate Change Act 2008
also sets legally binding emission reduction targets for 2020 (reduction of at
least 34% in greenhouse gas emissions) and for 2050 (reduction of at least 80%
in greenhouse gas emissions); the Act also introduces five-yearly carbon
budgets to help ensure these targets are met. As well as this, there is the
Warm Homes and Energy Conservation Act 2000.
10. Fuel Poverty - the Facts:
· Last
winter brought an estimated 25,400 excess winter deaths
· The most recent official Government statistics,
based on 2009 data, put the total number of households living in fuel poverty
in the UK at 5.4 million.
· NEA projects that once the price
increases of the summer 2011 come into effect, there will be approximately 6.6
million UK households in fuel poverty (NEA/CSE estimates 2011).
· The consequences of fuel poverty
range from psychological stress, worry and social isolation to causing or
exacerbating serious illnesses such as respiratory and circulatory conditions.
Last winter brought an estimated 25,400 excess winter deaths, regional figures
can be found at the back of this document.
· Fuel poverty is defined as the need
for a household to spend more than ten per cent of its income on total fuel
use.
· Fuel poverty is caused by three
factors – inadequate heating and insulation, low incomes and the continued high
cost of energy bills.
· Fuel poverty can affect anyone, but
is often most prevalent among vulnerable households including pensioners,
people with children under the age of 16, those on benefits, people with
disabilities and people suffering with long-term illness.
· The Government had a commitment to
end fuel poverty in England by 2010 for vulnerable groups and for all
households by 2016 (The UK Fuel Poverty Strategy 2001). The first target has
not been met.
· Fuel poverty can be particularly
severe in rural areas where properties are often older, are not suitable for
cavity wall insulation and are off the gas network and have to rely on more
expensive fuels such as oil.
Taken from National Energy Action
Greater investment in tackling fuel poverty would also:
• Reduce costs to the
NHS – for every £1 spent on keeping fuel poor homes warm reduces the cost to
the NHS by 42p
• Improve local
economic activity particularly in deprived areas – money not spent on fuel
bills will find its way into the local economy
• Create thousands of
green jobs – whole house energy efficiency upgrades will require significantly
more skilled labour resources
• Reduce the inequity
caused by carbon abatement charges on fuel bills
• Contribute to
achieving the Government’s binding carbon reduction targets
• Facilitate improved
benefit targeting – the delivery of energy efficiency measures to fuel poor
households will provide the interaction required to determine benefit entitlement.
Taken from: Fuel Poverty Advisory Group
Small steps for energy saving to think about:
Use less energy – energy saving Light bulbs. Making sure dishwasher and washing machine are
full. New appliances are more efficient. Shower rather than bath, putting a lid
on the saucepan when boiling water, switch lights off, don’t leave computers or
TV’s on standby. Put a jumper on. We may not be able to control the cost of
energy prices, but we can control the amount we use.
