Renewable energy to save consumers between £25 and £100 billion

A new government report outlines the economic case for renewable energy, writes RenewableUK’s Gordon Edge.

An official report published today on the dangers of failing to invest in renewable energy represents a timely call for the Government to set clear long-term policies to boost the deployment of wind, wave and tidal power. The independent and highly authoritative study makes it clear that hard-pressed British consumers’ bills have shot up due to the UK’s dependence on imports of fossil fuels, and it therefore recommends measures to encourage investment in domestic low-carbon sources to bring the cost of electricity under control.

The official body which advises the Government on this issue, the Committee on Climate Change, says investing in low-carbon technologies between 2020 and 2030, such as wind and marine energy, will save UK consumers at least £25-£45bn over the lifetime of those projects, rising to £100bn if international gas prices continue to escalate.

The Committee says one of the best ways to stimulate investment in renewables is to set a carbon reduction target in the Energy Bill now going through Parliament, specifying a reduction to 10 per cent of 1990 levels by 2030 (from 500 grammes per kilowatt hour to 50g/kWh). MPs are due to vote on this issue in early June.

It also recommends that the Government should specify how much financial support will be available for low-carbon energy between now and 2030 – at present, the long-term vision for the power sector only goes as far as 2020. The report highlights the need to develop a specific strategy for the development of offshore wind, including ways to attract new sources of finance.

This thorough research by the most authoritative body in its field provides compelling evidence that investment in British renewables is cost-effective, whereas an unhealthy addiction to foreign fossil fuels is excruciatingly expensive, as well as being deeply irresponsible. RenewableUK’s own figures show that combined onshore and offshore wind are generating £2.5bn a year for the UK, and as such are one of the single biggest sources of investment into our economy – surely an opportunity we cannot afford to ignore. And with DECC’s own figures showing that 74 per cent of people are concerned about the UK’s reliance on imported fossil fuels, this is an issue the vast majority of the country is united on.

The Committee on Climate Change is also right to highlight the fact that the current lack of a long-term political vision is jeopardising investment in renewable energy projects – including the development of the supply chain which could create tens of thousands of jobs in wind and marine energy, with turbine factories opening around the UK.

Earlier this week the European Parliament voted in favour of setting a binding 2030 renewable energy target, to provide long-term clarity. The UK should be sending out similarly positive signals, so that we can maintain Britain’s global lead in the offshore wind, wave and tidal sectors, as well as maintaining our success in onshore wind which is the most cost effective way to generate large amounts of low carbon electricity to power our homes.

Photograph: CCC

Dr Gordon Edge is RenewableUK’s Director of Policy.

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I was wrong about Help to Buy - but I'm still glad it's gone

As a mortgage journalist in 2013, I was deeply sceptical of the guarantee scheme. 

If you just read the headlines about Help to Buy, you could be under the impression that Theresa May has just axed an important scheme for first-time buyers. If you're on the left, you might conclude that she is on a mission to make life worse for ordinary working people. If you just enjoy blue-on-blue action, it's a swipe at the Chancellor she sacked, George Osborne.

Except it's none of those things. Help to Buy mortgage guarantee scheme is a policy that actually worked pretty well - despite the concerns of financial journalists including me - and has served its purpose.

When Osborne first announced Help to Buy in 2013, it was controversial. Mortgage journalists, such as I was at the time, were still mopping up news from the financial crisis. We were still writing up reports about the toxic loan books that had brought the banks crashing down. The idea of the Government promising to bail out mortgage borrowers seemed the height of recklessness.

But the Government always intended Help to Buy mortgage guarantee to act as a stimulus, not a long-term solution. From the beginning, it had an end date - 31 December 2016. The idea was to encourage big banks to start lending again.

So far, the record of Help to Buy has been pretty good. A first-time buyer in 2013 with a 5 per cent deposit had 56 mortgage products to choose from - not much when you consider some of those products would have been ridiculously expensive or would come with many strings attached. By 2016, according to Moneyfacts, first-time buyers had 271 products to choose from, nearly a five-fold increase

Over the same period, financial regulators have introduced much tougher mortgage affordability rules. First-time buyers can be expected to be interrogated about their income, their little luxuries and how they would cope if interest rates rose (contrary to our expectations in 2013, the Bank of England base rate has actually fallen). 

A criticism that still rings true, however, is that the mortgage guarantee scheme only helps boost demand for properties, while doing nothing about the lack of housing supply. Unlike its sister scheme, the Help to Buy equity loan scheme, there is no incentive for property companies to build more homes. According to FullFact, there were just 112,000 homes being built in England and Wales in 2010. By 2015, that had increased, but only to a mere 149,000.

This lack of supply helps to prop up house prices - one of the factors making it so difficult to get on the housing ladder in the first place. In July, the average house price in England was £233,000. This means a first-time buyer with a 5 per cent deposit of £11,650 would still need to be earning nearly £50,000 to meet most mortgage affordability criteria. In other words, the Help to Buy mortgage guarantee is targeted squarely at the middle class.

The Government plans to maintain the Help to Buy equity loan scheme, which is restricted to new builds, and the Help to Buy ISA, which rewards savers at a time of low interest rates. As for Help to Buy mortgage guarantee, the scheme may be dead, but so long as high street banks are offering 95 per cent mortgages, its effects are still with us.