Are renewable energy tariffs more expensive? Is it true? Is it a myth? We are here to break down the facts and figures when it comes to renewable energy costs for bill payers.
If you’re considering switching over to one of the UK’s many renewable energy tariffs, but you don’t want to have to pay out a big increase, read this article and figure out for yourself. You may find that renewable energy is cheaper than what you’re paying now.
It’s an emerging industry
Renewable energy is getting cheaper, year on year. However, it has its own fluctuations, just like the energy produced by fossil fuels. Sometimes, the countries we buy coal, oil, nuclear energy and natural gas from, raise and lower their prices according to their own supplies and reserves. Sometimes, the wind doesn’t blow, the sun doesn’t shine, the seas are calm and renewable energy really relies on them to not do that. The other problem with renewable energy is that it’s emerging, and so it doesn’t have the necessary infrastructure that fossil fuels has, to have a huge surplus of available energy to drop the prices.
The first wind powered turbines actually came into fashion in the 1880s, but were very limited in their capabilities, unsurprising for the time. In the 1970s, they resurged, becoming quite popular for enthusiasts who felt they could provider a cleaner alternative to fossil fuels. Again, the scale and capabilities were not there to be taken seriously.
Fact: In June 2016, a record 46% of the UK’s energy was provided by clean sources, such as wind.
With many complaints at local level about noise and visual damage to the countryside, offshore farms were built as a compromise. 25% of the total energy produced in the UK from June 2015 to June 2016 came from wind, solar, hydro and biomass. A particularly windy year with lots of rain was partially accountable for this dramatic rise, in which renewable sources provided more energy than coal for the first time.
So, why is it more expensive?
Old technology like coal plants has functioned well for a long time, but now they are starting to close down and be replaced by new technology. This comes with an associated cost, as the money for each wind turbine, hydro dam or solar panel installation must be recuperated. The cost of change is capital heavy, as it is expensive to install renewable energy generators, but incredibly cheap to run them. Over time, we will see renewable energy as the cheapest option by far.
Because wind and solar power does not function 24/7, the gap must be filled by traditional power sources, causing an added expense. Combine that with the remoteness of wind and solar farms, and the cost of connecting them to the grid, and you can start to imagine why renewable energy seems so expensive. Try building your own wind turbine and solar panels and then multiply that cost over powering thousands of homes. It’s a pricey investment that will take at least a decade to pay off.
The carrot and the stick
The government and the energy companies are working hard together to build more and more ways of generating renewable energy, as it will provide a great long-term boost to the economy. The main issue is the cost of building and installing them, and so, in turn, coal-fired stations stick around longer, polluting the environment twice as much as gas-fired ones. Nuclear energy accounts for a fifth of our consumption in the UK, and whilst rising in price, remains cheaper than coal and gas, but is controversial to many environmentalists who feel that increasing nuclear capabilities sets a dangerous precedent.
Switching from coal and gas to nuclear and gas could provide the support needed whilst the renewable energy tariffs level out, thanks to increased infrastructure.
The most expensive and cheapest tariffs
In terms of renewable energy tariffs, three green energy companies (Ecotricity, Green Energy UK & Good Energy) sit as the third, fourth and fifth most expensive suppliers in the country. The cheapest renewable energy tariffs are likely to be found through OVO Energy or Co-operative Energy.
Looking to the future of renewable energy tariffs
Whilst we have no crystal ball to gaze into, we can make some solid guesses on what may happen in the future for companies with renewable energy tariffs. We suggested earlier in this article that it will take at least a decade to pay off the initial cost of investment for much of the green tech we have now. Solar panels, wind turbines and hydro-dams, for example, will get cheaper year-on-year as they get closer to ‘breaking even’, and after that, the price of renewable energy should steadily drop.
The UK has the most expensive energy in Europe (14.8p) in terms of pence per kWh, but one of the lowest tax rates on energy, at just 5%. Compare that to Denmark, whose energy costs 9.4p per kWh, but then has a WHOPPING 57% tax added on top, to make customers pay 22.5p per kWh. Over the last few years, British bills have increased more than any other country in Europe (12%), four times more than the EU average in fact.
The reason that our bills are so high is because we are putting the cost of ending the reliance on fossil fuels onto the UK taxpayer. Smart Meters, provided for free to UK homes, were actually funded (£11bn) by tax money, and so are many renewable energy projects up and down the UK. We predict that in future, the government will use this money to ensure that only clean energy projects are being developed, and that we move away from nuclear and coal. To do this, it’s possible that the tax rate will increase.
Did you enjoy this story? Read our article on the rise of independent energy companies in the UK.
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