HOUSEHOLDERS face a rise of more than £170 in annual electricity bills to cover the massive subsidies shelled out to power firms for shifting to green energy sources over the next decade, experts have claimed.
Leading economists attacked the “excessive” £15 billion UK-wide pay-outs and warned they would lead to growing public anger, during a conference on the economics of renewables organised by The Scotsman.
The cost of the subsidies would be split between domestic and business customers, with households likely to pick up about a third of the outlay, amounting to an extra £170 a year on their bills.
The Scottish Government is committed to generating enough power to meet all of Scotland’s electricity needs from renewable sources, such as wind farms, by 2020.
But energy minister Fergus Ewing told the conference yesterday Scotland’s power supplies would always come from a “balanced mix” of sources.
Dr John Constable, director of the Renewable Energy Foundation, said that subsidy levels for renewable energy would be about £8bn by 2020, with grid management costs of about £5bn a year before VAT.
“The total additional costs to the consumer of the policies for electricity alone would be about £15bn,” he warned. “This is 1 per cent of GDP – that’s not credible and it’s not sustainable. It’s an enormous barnacle on an economy that’s struggling to recover.
“This is not the right way to develop renewables. You don’t want to over-shelter the sector with protection at that level. We will not discover what renewables have to offer until we stop subsidising it like this.”
Dr Constable said renewables were being treated like “spoilt children” because of the subsidies available.
“We’re trying to meet arbitrary targets without due regard to costs and those costs are extremely high. There will be public disenchantment with it.”
Energy economist Professor Tony MacKay added that protectionism had created a “very distorted market” for onshore wind farms.
“The subsidies in existence for the onshore wind farms are far greater than they require to go ahead,” he said.
“We need to make some big changes in order to get a more sensible renewable energy strategy in Scotland.”
Professor George Yarrow, chairman of the Regulatory Policy Institute, said the current focus on replacing environmentally unfriendly power sources, including coal-fired power stations, with green technologies such as wind farms overlooked the impact on electricity bills.
“That’s likely to prove a very costly strategy and very highly regressive in terms of income distribution, with transfers from low income households going to, among others on a fairly large scale, landed interests,” he said.
But Mr Ewing said: “Scotland, under the SNP, will not, does not and cannot rely on renewable energy alone. It will be part of a mix – a balanced mix.”
The minister said some people might be under the impression that the Nationalists’ plan was for “all our lights to be kept on by renewables”.
He added: “Plainly this is absurd. It’s not true and it’s important for me to state that this is the case.”