Cost of living: Why are energy bills lower in some countries than the UK? Business News


Millions of households in the UK are facing an unprecedented increase in energy bills of £700 a year after the price ceiling rose by 54% in April.

Another sharp increase Expected in October.

But in some other countries, families pay much less for the cost of heating their homes.

Where do energy bills go down?

Canada and Norway have the lowest household electricity prices among OECD countries with at least five million people, according to the Australian Energy Council.

Hydroelectric power plants dominate in both countries and are a source of renewable energy.

Canada gets most of its electricity from hydro (60%), followed by nuclear (13.5%) and gas (11.26%) power plants.

Norway gets almost all of its needs from hydropower sources (about 93%).

In other countries that rely heavily on hydropower – Costa Rica, Switzerland, Austria and Sweden – consumers also pay less.

Canada has another advantage: It has its own gas supplies that it can rely on, which gives it more control over prices.

This is also the case in Israel, which relies mainly on gas (65%), followed by coal (29%) and solar energy (6%). The picture is similar in the United States, where natural gas makes up 38% of the country’s electricity. Coal makes up 31%, nuclear 19%, wind 9%, solar 4%, and hydropower 6%.

In South Korea, low taxes and government regulations have played a major role in reducing electricity prices despite the costs of importing gas, the second largest source at 29%. Coal supply 35%.

Gas and Nuclear Effect

Unlike most of these countries, the UK is forced to import large quantities of gas, which is the largest source of electricity.

Gas makes up 40.1%, followed by wind (21.1%), nuclear (15.3%), biomass and other renewables (12.8%), solar (4.1%), oil (2.8%), hydro (1.8%) and coal (2). %).

The higher the percentage of gas, the more likely costs will be, says Luke Murphy, associate director of energy and climate at the IPPR think tank.

Of the 31 OECD countries above, the United Kingdom ranks sixth in its dependence on gas.

“If we had a higher proportion of renewables in our energy mix, there is no doubt that consumers would have lower bills,” Murphy told Sky News.

He says increased investment in nuclear power “isn’t going to lower bills anytime soon”, referring to the UK government’s proposal to build Eight other nuclear reactors.

“Nuclear power is actually one of the most expensive sources of energy,” he says. “UK nuclear projects suffer from delays and cost overruns.”

“More focus on onshore wind, for example, would contribute faster to lower bills, because it takes much less time to run and wind on land compared to a nuclear power plant,” he adds.

The role of renewable energy sources

Jonathan Marshall, chief economist at the Resolution Foundation think tank, agrees, saying there is greater potential for increased use of wind and solar power to reduce wholesale costs.

He told Sky News that the UK’s geography, which has fewer lakes and mountains than other countries, makes it less suitable for hydropower on a very large scale.

But there is some “room for growth,” he says, in the use of pumped hydro – which is already being generated through the use of large reservoirs in Scotland and Wales.

Marshall says the government has limited the development of onshore wind farms, preferring offshore wind instead.

Expressed Ministers Concerns that the wild wind is unpopular with the public – But Mr. Marshall says “there is no evidence of that.”

“A lot of surveys show that people absolutely love wind turbines,” he says.

Offshore turbines benefit from greater amounts of wind and fewer constraints on their size, which results in more electricity being generated, he says.

However, offshore wind is much more expensive than onshore wind and takes longer to build, according to the National Network.

In its energy strategy, the government said it would consider developing more onshore wind infrastructure but refused to change planning restrictions or set new targets. It aims to increase solar energy fivefold by 2035.

The effect of carbon taxes

Another problem with the UK’s dependence on gas, Marshall says, is that its cost has been raised by carbon tariffs.

The UK has a carbon emissions trading scheme it set up after leaving a similar regime in the EU, which also affects the cost of coal.

To incentivize companies to reduce their emissions, the government sets a cap on their maximum level and creates an allowance for each unit of emissions allowed under the cap.

Those who need more allowances have to pay for it.

The system is different in Northern Ireland, where generators are still part of the EU’s trade scheme.

In addition, England, Scotland and Wales impose a local carbon tax, known as a carbon price support, which was introduced in 2013.

“This makes UK wholesale electricity more expensive than it is elsewhere” – but it is also one of the reasons why the UK has reduced its reliance on coal power, which made up 40% of UK electricity a decade ago, Marshall says. . .

Regarding the environmental goals of the policies, he says, “These are the things that work. They obviously come at a cost, and that cost ends up feeding through the household bills.”

Read more:
What is the price cap and why are bills rising so sharply?

The costs of government policy

Extra taxes are levied on family bills in England, Wales and Scotland to fund government policies, costing the typical family about £160 a year, says Marshall.

Examples include social programs such as the Warm Home Discount, which gives low-income families £140 off their winter bills.

Another is the commitment of energy companies, a scheme to insulate homes for low-income people, as well as replace old, inefficient boilers and heating.

“Some other countries have decided to fund social programs through general taxes and not through bills, because they are generally more fair,” he says.

Most policy costs are charged to each unit of energy used.

He says those who use more energy will pay more but even so, lower-income families are hurt worse than if those costs were financed through taxes.

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network costs

Another part of what determines energy bills is the cost of networks – pipes, wires, and networks.

Britain has a privatized power grid, Marshall says, while the grid infrastructure in some other countries is owned by government entities that “make no money”, leading to lower costs.

“The companies that run networks in the UK are making huge profits,” he says. “They can make profit margins of 30 or 40% of the cost of operating the network, because there is little regulatory oversight.

“The regulator that is supposed to take care of consumer interests in terms of energy bills didn’t do that part of the job very well the last time it set how much money these companies were allowed to make.”

In Northern Ireland, where energy management is almost entirely delegated and there is no price cap, the country owns an electricity transmission and distribution network.

Some states early on, Marshall says, started paying for the network upgrades required to move away from coal.

poor insulation

Bad insulation doesn’t affect the price of electricity – but it does have a big impact on how much families end up spending to heat their homes.

“We have some of the most leaky homes in Europe,” Murphy says. “This also leads to higher energy bills. If the government had been better at investing in home insulation over the past decade, we would have had warmer homes and would use less energy.”

Marshall says Italian residents can get grants that cover the full cost of upgrading their homes — plus an additional 10% as an added incentive. The amount paid over time depends on how much people earn.

Government intervention and relief schemes

Some governments have stepped in to reduce billing costs and provide greater financial support to those struggling to pay.

The UK government is offering a £200 discount on energy bills from this October that will have to be paid over five years and is available to most people in England, Scotland and Wales. In Northern Ireland, some people will be paid £200 in benefits.

Most families will also get a £150 reduction on their council tax bill this year, which applies to those who live in A to D properties.

“In the UK, I’ve seen less generous government support for people to lower their energy bills,” Murphy says.

Read more:
Four simple changes you can make to save £400 on your energy bills

He points out that the government in Germany has taken comprehensive measures to protect consumers from high energy bills.

It includes €300 for energy subsidy allowance for those who pay income tax, €100 for boosting child support, €200 for those receiving benefits, as well as subsidies for low-income families.

In France, where the state owns the main energy supplier, the government intervened directly to limit the increase in the energy bill to 4% this year.

To help pay for support measures, Spain, France and Italy have imposed windfall taxes on energy company profits.

A spokesperson for the Department for Business, Energy and Industrial Strategy said: “High wholesale gas prices are an international problem, based on global supply constraints. This is why our energy security strategy will wean the UK off foreign fossil fuels to ensure we produce clean, cheap and safe energy at home, and reduce Our exposure to world gas prices.

“We continue to help people struggling with rising energy costs, with a £22 billion support package including a £150 council tax rebate this month and a £200 energy bill rebate in October.”

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