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Energy Crunch: the truth about green levies

 Three things you shouldn't miss this week

  1. Chart of the week: what actually makes up our household energy bills?



    Graphic: Paul Scruton - The Guardian
     
  2. How to lose half a trillion euros - The existential threat facing Europe’s electricity providers.
     
  3. Energy Darwinism: Fossil fuels and utilities at risk - A major new report from investment banking giant Citi has highlighted the dramatic changes sweeping the world’s energy industry.
 
Scottish & Southern Energy’s announcement of an 8.2% hike in household energy bills unleashed a political storm this week. CEO Alistair Phillips-Davies’s calls for a review of the government’s green energy levies were taken up by the Prime Minster even as his Lib Dem cabinet colleague Vince Cable dismissed the idea as “foolish”.
 
What any review would find is that just 9% of average household energy bills are due to these green levies (see chart above), over half of which are used to invest in measures to keep the poor and elderly warm. The bulk of household energy costs are dictated by the cost of wholesale fuel, and investments in upgrading network infrastructure. 
 
Elsewhere big energy companies are having a tough time – particularly in Europe where the growth of renewables is hollowing out the utilities’ business model. In Germany wind and solar have eviscerated the big energy companies’ profits and credit ratings, while new analysis from banking giant Citi shows that solar is rapidly displacing fossil fuels in power generation, even in the US, where gas is currently cheap. The financial risks of investing in high-carbon energy, they conclude, are far higher than most realise.
 
The same path awaits the UK. The British government will at some point be forced to confront such contradictions in energy policy: how to ensure investment in huge amounts of new infrastructure while the utilities' business model falls apart. Politicians hoping that it will be shale gas to the rescue should pay heed to Shell's departing boss Peter Voser, who described talk that the US shale revolution will be repeated elsewhere as just "a big hype at the moment".
 
The Energy Crunch team: Simone Osborn, David Strahan, Aniol Esteban, Tim Jenkins
 
Lightbulb image via hddod/flickr

 

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