Could getting Paid to use Less Energy be a Possibility?

We all know from our bills that prices have doubled in line with the increased cost of imported gas, which now makes up 40% of our demand. The chief executive of British Gas, Sam Laidlaw, said “The price we pay for our gas is determined by a global marketplace, not the marginal cost of North Sea production.”

In the 1990s, it was good for both cost and climate, to rely on a single source of fuel for almost all our heating and half our electricity, which is looking quite foolish now that prices are increasing.

In theory, we should be using less energy and cutting back on our gas, air conditioning units and electrical products like flat screen TVs, as the prices are rising, which should lead to less cost and less carbon in the atmosphere. But the price rises for consumers has also created a political demand for action to cut prices, which has fed demands on George Osborne, the Chancellor of the Exchequer, who is responsible for all economic and financial matters, to cut “green levies” on our bills. But some argue that it will raise future bills, which would be counterproductive.

It is thought that it wouldn’t have much effect on our current bills as green levies only account for around 7% of the normal consumer’s bill. Lowering the UK’s 202 renewables target will take around £21 off domestic consumer bills by the next election in 2015, but recent price increases from the big six energy suppliers amount to a £134 rise on average bills and reflect higher gas costs. So we won’t necessarily have a big cut in bills if ditching our green ambitions.

Another thing to think about is in the latter half of this decade when the UK could be even more dependent on imported fuel. No one knows or understands which energy technologies will provide low carbon and low cost power in the future. The reason for green levies is to force the energy industry to diversify so we have a chance of discovering a low cost pathway to a decarbonised power sector by 2030. If we knew what will be cheap in the future, then diversification isn’t the cheapest strategy, but unfortunately we don’t.

As we don’t know what will give us cheap (or affordable) energy in the future, we know that saving energy makes good economic and environmental sense now.

The idea of Green Alliance’s proposal for an electricity efficiency feed-in tariff, is to pay people to use less energy, where consumers will have to pay to build new power stations to meet future demand. Then, if we can spend less to cut our demand and avoid the need to build, we can save money. If we do this, then we could save £35billion on the UK’s energy bill between now and 2025.

The aggressive effect of paying for energy saving is also outstanding. There is no competition to create less generation in today’s market; and none of the government’s electricity market reforms doubtful, thus far will create a market for energy saving.

By paying for energy saving, we can pressure power generators to compete with companies which can display real energy savings, and use private-sector innovation to slice the cost of consumer bills.

With a little change to the government’s flagship electricity market reforms, the policy incentive could be formed, and won’t hold up investment in new low-carbon power stations.

An electricity efficiency feed-in tariff is a economically, politically and environmentally sound answer to business and consumer concerns about price rises. It could also provide relief to those struggling with their energy bills as it could be put into place quickly