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Row over impact of green energy plans on bills

Wind turbinesThe cost of low-carbon electricity under the new Energy Bill will add less than £100 to average annual household bills, Energy Secretary Ed Davey said on Friday. 

Critics claim the legislation will send household energy bills soaring, by authorising ministers to put £7.6 billion towards "green" power generation in 2020, up from £2.35 billion this year.

But environmentalists say the new Energy Bill does not go far enough.

This is because the Bill does not include a target to cut carbon emissions from the energy sector by 2030.

But the Bill does include the power to set a target in 2016 if it is considered necessary.

Aging infrastructure

An estimated £110 billion is needed in the next decade to renew the UK's ageing electricity infrastructure.

Much of this money will be spent on low-carbon power sources such as wind farms to cut emissions and keep the lights on.

The forthcoming Energy Bill, which aims to drive the investment, has been the subject of political wrangling within the coalition government.

Mr Davey has voiced support for long-term limits on carbon emissions by the energy sector.

Meanwhile, Chancellor George Osborne has backed plans for new gas power plants as a cheap source of electricity and tax relief for unconventional shale gas exploration in the UK.

But agreement has now been reached on a series of contentious issues.

In a statement on Thursday night, Mr Davey hailed a "durable agreement" which would allow him to introduce a Bill next week and have essential electricity market reforms up and running by 2014, as planned.

'Keep the lights on'

"They 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," he said.

The agreement will also see a "capacity mechanism" established.

This will allow companies to bid in auctions for support to provide flexible electricity supplies such as gas power, or for measures to reduce demand for energy, from 2014 if it appears that UK peak demand might exceed supplies.

The Energy Bill will also set up a government-owned company with which firms can sign long-term contracts to receive a guaranteed price for electricity from low-carbon sources.

It is hoped this will give investors certainty and will bring down the high cost of capital for schemes such as nuclear reactors and offshore wind.

'Green energy good'

Kate Rose, head of energy at Confused.com, said in the long run switching the UK over to green energy is a good thing.

She explained: "Not just because of the importance of protecting our environment, but also because this will reduce our reliance on fuels from overseas.

"Imported energy is subject to world pricing and could be either cheaper or more expensive depending on the market at that time.

"The recent energy price hikes can be attributed to wholesale costs rising, as well as government intervention in things like energy efficiency and infrastructure.

"We are analysing the impact the Energy Bill will have on consumers' fuel bills.

In the meantime we know prices will go up over the next few years and so consumers will have no choice but to shop around to save money.

"Green energy is expensive but with the government committing to carbon reduction targets, it is a necessary requirement and will protect our futures."

How to save

Five of the big six gas and electricity firms have announced price rises. But you could lower your winter gas and electricity prices by shopping around for a cheaper deal.

Check out our gas and electricity switching service for more details and to see how much you could save.




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Naphtalia Loderick

Naphtalia Loderick

Naphtalia Loderick reports on all things personal finance at Confused.com. She started out on a weekly newspaper, via a national news agency and a stint in the fun but ‘not as glamorous as it appears on screen’ world of TV at the BBC researching consumer films for The One Show.

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