Cost of living: Why some countries have lower energy bills than the UK

Millions of households in the UK are dealing with an unprecedented £700-a-year improve in energy bills after the value cap rose by 54% in April.

Another sharp improve is anticipated in October.

But in some different countries, households are paying far much less for the value of heating their properties.

Where are energy bills lower?

Canada and Norway have the lowest family electrical energy costs amongst OECD countries with no less than 5 million individuals, based on the Australian Energy Council.

Both countries are dominated by hydroelectricity crops, a renewable energy supply.

Canada will get most of its electrical energy from hydro (60%), adopted by nuclear (13.5%) and gasoline energy crops (11.26%).

Norway obtains virtually all of its wants from hydro sources (about 93%).

In different countries that rely closely on hydro – Costa Rica, Switzerland, Austria and Sweden – shoppers additionally pay much less.

Canada has one other benefit: it has its personal gasoline provides that it might draw on, giving it extra management over costs.

This can also be the case in Israel, which depends totally on gasoline (65%), adopted by coal (29%) and photo voltaic (6%). The image is comparable in the US, the place pure gasoline accounts for 38% of the nation’s electrical energy. Coal makes up 31%, nuclear 19%, wind 9%, photo voltaic 4% and hydro 6%.

In South Korea, low taxation and authorities regulation have performed a key function in limiting electrical energy costs regardless of the prices of importing gasoline, the second-largest supply at 29%. Coal provides 35%.

The influence of gasoline and nuclear

Unlike most of these countries, the UK is compelled to import massive quantities of gasoline, which is its largest electrical energy supply.

Gas makes up 40.1%, adopted by wind (21.1%), nuclear (15.3%), biomass and different renewables (12.8%), photo voltaic (4.1%), oil (2.8%), hydro (1.8%) and coal (2%).

Luke Murphy, affiliate director for energy and local weather at the IPPR assume tank, says the increased the proportion of gasoline, the increased the prices are prone to be.

Among the 31 OECD countries above, the UK ranks sixth in its dependence on gasoline.

“Had we had a higher proportion of renewables in our energy mix, there’s no doubt that consumers would have lower bills,” Mr Murphy tells Sky News.

He says elevated funding in nuclear energy is “not going to bring down bills any time soon”, referring to the UK authorities’s proposal to construct eight extra nuclear reactors.

“Nuclear power is actually one of the most expensive energy sources,” he says. “Nuclear projects in the UK have been beset by delays and cost overruns.”

“A greater focus on onshore wind, for example, would make a much quicker contribution to lowering bills, because it takes much less time to get onshore wind up and running than it does a nuclear power station,” he provides.

The function of renewables

Jonathan Marshall, senior economist at the Resolution Foundation assume tank, agrees, saying there may be larger potential to extend the use of wind and solar energy to drive down wholesale prices.

He tells Sky News the geography of the UK, which has fewer lakes and mountains than different countries, makes it much less appropriate for hydroelectricity on a really massive scale.

But there may be some “scope for growth”, he says, in utilizing pumped hydroelectricity – which is already being generated by the use of massive reservoirs in Scotland and Wales.

Mr Marshall says the authorities has restricted the growth of onshore wind farms, favouring offshore wind as an alternative.

Ministers have expressed issues that onshore wind is unpopular with the public – however Mr Marshall says “there’s not really any evidence for that”.

“Loads and loads of polling shows that people actually quite like wind turbines,” he says.

Turbines in the sea profit from larger quantities of wind and fewer restrictions on how massive they are often, which leads to extra electrical energy being generated, he says.

However, offshore wind is considerably dearer than onshore wind and takes longer to construct, based on the National Grid.

In its energy technique, the authorities mentioned it will think about creating extra onshore wind infrastructure however refused to alter planning restrictions or set new targets. It is aiming for a fivefold improve in photo voltaic capability by 2035.

The affect of carbon levies

Mr Marshall says one other drawback with the UK’s reliance on gasoline is that its value is pushed up by carbon levies.

The UK has a carbon emissions buying and selling scheme that it arrange after leaving an identical system in the EU, which additionally impacts the value of coal.

To incentivise companies to scale back their emissions, the authorities units a cap on their most stage and creates allowances for every unit of emissions allowed underneath the cap.

Those who want extra allowances are compelled to pay for them.

The system is totally different in Northern Ireland, the place electrical energy mills are nonetheless half of the EU’s buying and selling scheme.

In addition to this, England, Scotland and Wales have a home carbon tax, generally known as the Carbon Price Support, which was launched in 2013.

“That makes wholesale electricity more expensive in the UK than it does elsewhere,” Mr Marshall says – however it is usually one of the causes the UK has diminished its reliance on coal energy, which made up 40% of the UK’s electrical energy a decade in the past.

In phrases of the environmental goals of the insurance policies, he says: “This is stuff that works. It just obviously comes at a cost, and that cost ends up feeding through to household bills.”

Read extra:
What is the value cap and why will bills rise so sharply?

Government coverage prices

Additional taxes are tacked on to family bills in England, Wales and Scotland to fund authorities insurance policies, costing a typical family about £160 a yr, Mr Marshall says.

Examples embrace social programmes like the Warm Homes Discount, which supplies lower revenue households £140 off their bills in the winter.

Another is the Energy Companies Obligation, a scheme to insulate properties for individuals on lower incomes, in addition to substitute boilers and previous inefficient heating.

“Some other countries have decided to fund the social programmes through general taxation rather than through bills, because it’s generally fairer,” he says.

Most of the coverage prices are levied on every unit of energy used.

He says those that use extra energy can pay extra however even nonetheless, lower revenue households are hit worse than they might be if these prices have been funded by taxation.

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Network prices

Another half of what determines energy bills is the value of the networks – the pipes, wires and grid.

Mr Marshall says Britain has a privatised energy community, whereas in some different countries the community infrastructure is owned by state entities that “don’t make any money”, resulting in lower prices.

“The companies that run the grids in the UK make an awful lot of money,” he says. “They can make 30 or 40% profit margins of the cost of running the grid, because there’s a bit of a regulatory oversight.

“The regulator that’s purported to take care of the client curiosity in phrases of energy bills did not do this half of the job very nicely the final time it set how a lot cash these corporations have been allowed to make.”

In Northern Ireland, the place the governance of energy is sort of solely devolved and there’s no value cap, the state owns the electrical energy transmission and distribution community.

Mr Marshall says some countries have additionally made an earlier begin to paying for community upgrades required to transition away from coal.

Poor insulation

Poor insulation doesn’t have an effect on the value of electrical energy – however it has a huge effect on how a lot households find yourself spending to maintain their properties heat.

“We have some of the leakiest homes in Europe,” Mr Murphy says. “That’s also leading to higher energy bills. If the government had been better at investing in home insulation over the last decade, we would have warmer homes and we’d be using less energy.”

Mr Marshall says Italian residents can get grants that cowl the complete value of upgrading their properties – plus an additional 10% as an added incentive. The quantity paid again over time relies on how a lot individuals earn.

Government intervention and aid schemes

Some governments have intervened to restrict the prices of bills and supplied larger monetary assist for many who are struggling to pay.

The UK authorities is providing a £200 rebate on energy bills from this October which might have to be paid again over 5 years and is on the market to most individuals in England, Scotland and Wales. In Northern Ireland, a £200 fee will likely be made to some individuals on advantages.

Most households may even get a £150 discount on their council tax invoice this yr, which applies to these residing in properties in bands A to D.

Mr Murphy says: “In the UK you’ve seen less generous support offered by government to people to lower their energy bills.”

Read extra:
Four easy adjustments you can also make to avoid wasting £400 in your energy bills

He factors out that in Germany the authorities has rolled out complete measures to defend shoppers from rising energy bills.

These embrace a €300 energy aid allowance for many who pay revenue tax, a €100 fee to spice up little one assist, €200 for these on advantages, in addition to subsidies for lower revenue households.

In France, the place the state owns the most important energy supplier, the authorities has instantly intervened to restrict energy invoice will increase to 4% this yr.

To assist pay for assist measures, Spain, France and Italy have imposed windfall taxes on the earnings of energy corporations.

A spokesperson for the Department for Business, Energy and Industrial Strategy mentioned: “High wholesale gas prices are an international issue, based on global supply constraints. This is why our energy security strategy will move the UK away from foreign fossil fuels to ensure we generate more clean, cheap and secure power at home, and reduce our exposure to international gas prices.

“We proceed to assist individuals scuffling with rising energy prices, with a £22bn package deal of assist, together with a £150 council tax rebate this month and a £200 energy invoice low cost in October.”

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