Green energy bill set to add £100 to annual electricity costs

Saturday, 24 November 2012 11:41

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The government will publish its Energy Bill early next week which will allow energy firms to charge customers an extra £7.6 billion over the next eight years to help pay for investment in the energy sector infrastructure that is expected to cost £110 billion over the next ten years.

The money will be used to help produce green energy and has more than tripled from the £2.35 billion consumers currently have to pay.

Politically, Labour says the bill represents a failure for the Liberal Democrats because a decision about setting carbon emission targets and banning gas from the electricity system has been put off until after the next election in 2016.

Politicians from all sides admitted that it was worrying that the government has not introduced targets for cutting carbon emissions by 2030.

Tim Yeo, chairman of the Commons energy select committee, said: "There will be concern that the government hasn't accepted the full implications – which are already clear – of the extent to which electricity generation needs to be decarbonised by 2030".

Caroline Flint, shadow energy and climate change secretary, said: "It is outrageous that on the day Ed Miliband committed to a tough cut in Britain's carbon levels by 2030, George Osborne and Ed Davey abandoned their target."

For consumers, the extra investment costs will add £110 a year to the average dual fuel energy bill by 2020, though the Department for Energy and Climate Change (DECC) say it will increase costs by a lower amount, £95 or seven per cent annually.

Ed Davey, the DECC Secretary described the bill as a "durable agreement" and that over time these bill increases will be reversed as the measures being implemented will lead to savings.

He said the bill "will allow us to meet our legally-binding carbon reduction and renewable energy obligations and will bring on the investment required to keep the lights on and bills affordable for consumers."

Attempting to allay concerns about the increased costs to consumers, Mr Davey said: "The impact from supporting green policy is only 2 per cent on people's bills at the moment.

"That will grow and by 2020 it will be about 7 per cent. We are talking about under £100 in 2020."

The Chancellor, George Osborne has been a supporter of keeping gas as an option for the energy mix of the future as he says it will be cheaper. The Liberal Democrats want clean energy and believe gas is not a part of this.

The Liberal Democrats believe that ending the UKs reliance on gas means the country will not be exposed to volatile gas prices in the future.

Environmentalists believe this will make it almost impossible for the UK to comply with its own law on climate change.

Friends of the Earth executive director Andy Atkins said: "The coalition has caved in to Osborne's reckless dash for gas and banged the final nail in the coffin of Cameron's pledge to lead the greenest government ever."

The political battle has meant that energy firms have been unsure of what will be required of them in the future. They know that they will have to pay a lot more, up to £100 billion by 2020 to renew the UK’s energy infrastructure but without knowing the government’s strategy, they don’t know which areas of investment will be their priorities.

The lack of a target for emissions is likely to add to the uncertainty over what is required by energy companies and also potential investors.

However, Energy UK, which represents the energy industry welcomed the bill.

Angela Knight, its chief executive said: "This agreement is good news and we look forward to seeing the details of the bill."

 

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