Switch to low-carbon future would save households £1,600, or maybe not

One of the great advantages of Twitter is that it lets you observe confirmation bias in real time. Statistics that back up our prejudices are retweeted faster than it takes a snake to wolf up the nearest insect. And today’s Independent has a headline ready made for observing such behaviour: “Switch to low-carbon future would save households £1,600.” This is undoubtedly a nice talking point immediately retweeted by an assortment of the climate concerned. A couple of examples:

Switch to low-carbon future would save households a whopping £1,600 ind.pn/10SnxEf. Story via @independent

— WWF Scotland (@WWFScotland) May 23, 2013

CCC: switch to low-carbon future would save households £1,600 ind.pn/13MR5nI time to tell your MP bit.ly/10ZMrgB #energybill

— Good Energy (@Good_Energy) May 23, 2013

Let’s break this statistic down to see what it means, if anything. The statistic is based on this new report from the CCC, the UK government’s official advisers on climate change. (Though, I should point out that the claim households will save £1,600 is not made by the CCC itself).

From the report:

We recommend the following package of measures that the Government should put in
place to improve conditions for investment:
• Set in legislation this Parliament a target to reduce the carbon intensity of power
generation to 50 gCO2
/kWh by 2030, with some flexibility to adjust this in the light
of new information.
• Set out strategies to support the development of less-mature technologies through
to competitive deployment.
• Extend to 2030 provisions for the funding of low-carbon technologies (i.e. “the Levy
Control Framework”).
• Publish in the Delivery Plan the amount of capacity that the Government intends to
contract over the period 2014/15-2018/19, and prices that it will pay for onshore and
offshore wind.
• Set out options to support mobilisation of new sources of finance, including roles
for the Green Investment Bank and Infrastructure UK.
These measures would support investment in a portfolio of low-carbon technologies
through the 2020s, which the report indicates would result in cost savings of
£25-45 billion, in present value terms under central case assumptions about gas
and carbon prices, rising to over £100 billion with high gas and carbon prices.
The alternative strategy would be to focus on investment in gas-fired generation in the
2020s, followed by investment in low-carbon technologies in the 2030s. This would
result in cost savings only in the event that gas prices were to fall significantly, or with
low carbon prices, and even then such savings would be limited.

(my emphasis)

So, we have potential savings of up to £100 billion. Or none whatsoever if we simply got rid of carbon prices or if gas prices are lower than these projections. Given our absolutely hopeless history of being able to project future costs of anything a good summary of the above is that we really have no idea how much money decarbonising electricity will or won’t save. And we would probably be a lot better of if we admitted just how uncertain these things are.

We can however cherry pick the statistics we want, so let’s focus on this £45 billion figure. To go from a total saving of £45 billion to an average household saving of £1,600 is simple: you divide £45 billion by the total number of houses in the UK, which is just a bit under 30 million. This seems to be rather fishy accounting, after all only one third of UK electricity is consumed by houses. Exactly why are these savings only going to houses? This accounting trick is well worn, and used often by opponents of renewables to inflate their costs a great deal, something environmentalists have rightly criticised. Yet, statistics that come down on the right side of the line are treated credulously.

So, here’s a bit of trivial advice: statistics related to energy costs that appear in the Guardian or the Independent should be treated as critically as those that appear in the Mail or the Telegraph.