Rising bills will pay for low-carbon economy

· Industry secretary reveals cost of green revolution · Pledge to shield poorest people from fuel poverty
Terry Macalister
The Guardian,
Friday June 27, 2008


Renewable energy strategy could see soaring household bills
Household gas bills could rise by up to 37% and electricity costs by 13% as the government lines up consumers to pay for a green revolution that would move Britain from oil dependence to a low carbon economy.
A renewable energy strategy outlined by ministers yesterday signalled that energy bills could soar by hundreds of pounds, and could push over 2 million extra people into fuel poverty.
John Hutton, the industry secretary, said proceeding with business as usual was not an option in the face of climate change, and added that the price of change was "really quite modest". But he promised special measures to ensure the poorest sections of the community were not hit hardest: "We have got to provide help, if we can, to low-income families particularly those with children, to meet the rising cost of energy."
Surcharges on gas and electricity are expected to reach a peak in 2020 under the government plans, as consumers help pay for £100bn investment by the private sector in wind turbines and solar panels, in an attempt to meet EU targets of producing 15% of all UK energy from renewable sources. The first government estimates of the cost to the consumer are published at a time when British Gas customers could face price rises of a further 30-40% later this summer as a result of a steep increase in wholesale gas costs.
Energywatch, the consumer group, said that every 1% increase in power bills brought 40,000 people into fuel poverty, defined as those who spend more than 10% of their income on lighting and heating. The current number is 4.5 million.
"We are very worried about the impact of this [renewable strategy]," said Patricia Ockenden, a spokeswoman for energywatch. "Most of our work is already focused on the fuel poor and the existing cost of energy for the wider population."
Friends of the Earth supported the government's drive to use far more renewable power, but said loading the cost onto the consumer was misguided. "It is politically stupid and socially incompetent to proceed down this path. The government needs a quantum leap in energy efficiency to show there is no contradiction between more renewables and tackling fuel poverty," said campaigner Dave Timms.
Higher fuel costs would not be felt until after 2010 and the main increases would come from 2015 onwards, according to the government's renewable energy consultation paper. "In 2020, as a result of the new incentives, domestic consumer bills are expected to increase 10-13% in electricity and 18-37% for gas bills," it says.
The government said the cost of building new green infrastructure, and therefore the price to the consumer, had been based on an oil price of $70 per barrel. If the price was $150, this would knock 35-40% off the relative cost of renewables. The price of oil is currently in the mid-$130s.
Hutton said he was sure that the City was ready to help stump up the £100bn of new investment needed, saying it would be "bonkers" not to take money from sovereign wealth funds in nations such as Saudi Arabia, as Gordon Brown had called for on a trip to Jeddah last weekend.
The industry secretary said there was no point worrying about whether the green revolution should have been funded by now-spent North Sea revenues. He intended to look ahead rather than staring into the "rear-view mirror".
The prospect of erecting 4,000 new wind turbines across rural Britain provoked criticism. "Climate change is the overwhelming threat to the environment. But it would be madness to desecrate the countryside, one of the nation's most valued environmental assets, in tackling it," said Neil Sinden, of the Campaign to Protect Rural England.
The National Trust, Britain's biggest private landowner, warned that new planning rules should not be used to override local objections. "Securing public consent for such far-reaching changes to our lives and our landscapes will demand greater respect for the environment and communities," said the trust's Tony Burton.
Another strand of criticism resulted from weariness at further consultation. Ben Warren, a director in the renewables group at Ernst and Young said: "The time for talking is surely over. Some tough decisions need to be made."
The Conservative shadow secretary for business, Alan Duncan, said: "It's astonishing that what is billed as a 'strategy' is just another consultation - more delays after a decade of dithering. This hesitation over critical decisions has Gordon Brown's fingerprints all over it."