The great energy gamble – heads you lose, tails you lose?

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The government often makes the case for its climate policies by pointing out that, as well as being essential on environmental grounds, they are in the financial best interests of energy consumers.

The argument goes that weaning ourselves off coal and gas will reduce our exposure to ever more volatile and expensive fossil fuels.

So far, so plausible? Well, it's certainly one possible scenario. But opinion is divided, with some seeing it as massive gamble on the future of fossil fuel prices.

What's most worrying for manufacturers is that, according to government analysis published alongside this week's Annual Energy Statement, there will be no upside for them, however fossil fuel prices pan out, for at least the next twenty years.

The table below is an extract from yesterday's analysis. It shows that the best case scenario for businesses is that the government's policies will ‘only' push up their electricity prices by 26% in 2020 and 29% in 2030.

Impact of Policies on Electricity Prices for Medium Sized Business Users

Scenario20202030
Low Fossil Fuel Prices+51%+58%
High Fossil Fuel Prices+26%+29%

The worst case scenario is truly alarming - policies will push up their by 51% in 2020 and 58% in 2030.

To recap, whatever happens to fossil fuel prices, if they go up or down, government policies will mean that businesses pay substantially more for their electricity.

This sounds less like a gamble, and more like a sure-fire way to place a losing bet.

Surely there must be a better way? A way cut to emissions without consumers being forced to pay such a high price?

EEF believes there is and in the second of our series of ‘Green and Growth' reports, due to be published on 13 December, we will be setting out our alternative vision. Watch this space.

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