Ed Miliband has given up trying to promise £300 a year off our energy bills. He is now dangling the prospect of something even better: ‘zero bill’ homes. He is expected to announce a new £13 billion ‘Warm Homes Fund’ to subsidise solar panels and heat pumps which could mean some householders paying nothing for their energy whatsoever.
That £13 billion Miliband is going to be shelling out to homeowners has to be paid for somehow. It will either come out of our bills or our taxes
Is that possible? Yes it is – if you get someone else to pay your energy bills for you. As it happens I already live in a zero bill home, in that the money that I earn from the solar panels on my roof exceeds the sums I pay for electricity and heating oil. In fact, my net energy bills are less than zero – I end up with an annual profit of several hundred pounds.
Unfortunately, however, this is not because my solar panels are super-efficient – rather it is because I was able to take advantage of the Feed-in Tariff scheme as it existed in 2011. Under the deal, I am currently selling electricity from my solar panels to the grid for over 70 pence per kilowatt-hour, rising with the Retail Prices Index. I am paid this even when I don’t feed the electricity into the grid – the payment is simply for generating electricity, so I get paid over 70 pence per unit even if I use it myself. When I buy electricity from the grid, by contrast, I pay around 30 pence per kilowatt-hour. This rather pleasing arrangement will continue for another 11 years.
It is a great deal for me, but not so much for energy consumers who don’t have solar panels on their roof, and who consequently are forced to subsidise my tumble drier through hidden levies on the bills. This burden will shortly be transferred onto general taxation, although that doesn’t make it a whole lot better – it is just that taxpayers will be coughing up instead. I could, I suppose, have refused on principle to take advantage of the scheme, but that would have left me paying for other people’s solar panels.
Miliband’s latest wheeze will be much the same. That £13 billion he is going to be shelling out to homeowners – and to judge by previous schemes the chief beneficiaries will be relatively well-off – has to be paid for somehow. It will either come out of our bills or our taxes. The creation of a subsidy scheme will do nothing to change the underlying economics of solar power, except in one sense: the more solar capacity that is installed, the more expensive it will become. Sunshine may be free, and the capital cost of solar panels may have fallen sharply compared to 14 years ago, when I paid £12,000 for my solar system (an outlay which was recouped in six years). But if you are going to build an electricity grid which makes use of significant quantities of intermittent renewable energy you can’t just look at the marginal cost of generating energy – you also have to take into account the cost of coping with the variation in output. You need, in other words, to pay for some form of energy storage or back-up. Both are extremely expensive: to store electrical energy in lithium ion batteries costs around three times as much as it does to generate the electricity in the first place. If you are going to use gas power stations to step in when there is little wind or sun – as we do at present – that costs a lot, too, because you have to pay for a plant which will spend much of its time idle. The more solar energy in the system, the bigger the cost.
When it comes to intermittency, solar is far worse than wind. Solar produces a lot of energy on summer afternoons when demand is low; and it produces zero energy on cold winter evenings when demand peaks. True, Miliband seems to be suggesting that his Warm Homes Fund will pay for batteries – which should smooth out the daily variation in solar output, but not seasonal changes. This is certainly not going to be cheap energy. It will only seem so to the beneficiaries because other people who are going to have to pay for it.
