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UK businesses face steep rise in energy bills

UK businesses face steep rise in energy bills

Businesses can expect to face a steep rise in energy bills after the government today published a comprehensive plan to cut greenhouse gases and end Britain’s dependence on risky oil and gas imports.

Although the individual policies had previously been announced in the coalition policy agreement or by ministers – and many were formerly Labour government initiatives – Chris Huhne, the energy and climate secretary, said the first annual energy statement provided more detail and a timetable for each move from consultation to legislation.

Alongside the energy statement, the Conservative-Liberal Democrat coalition published what it said was the first yearly estimate of the impact of its policies on customer bills. The estimate shows that compared to prices with no government action, combined annual gas and electricity costs for households would rise only £13 by 2020, but those for businesses would increase by hundreds of pounds a year. This is because businesses would benefit less from energy-efficiency measures available to households.

A third document showing different policy options for meeting the pledge requirement to cut emissions of greenhouse gases by 80% by 2050 was also published. It shows six “pathways” with different mixes of renewable energy such as wind and solar power, nuclear generation, and carbon capture and storage for gas and coal plants. Despite Huhne telling parliament he was confident new nuclear reactors would be built, one option shows that the targets could be met even without any new nuclear power plants to replace the current reactors when they go out of service by 2035.

As a result of the policies, “the lights are not going to go out on my watch”, said Huhne.

The publication was welcomed by many groups and businesses involved in supplying and financing low-carbon power. Paul Golby, chief executive of power giant E.ON UK, said: “These changes are essential to ensure we can all play our part in making sure the challenge of the trilemma is met – a low-carbon future with secure and affordable energy.”

However there were widespread concerns about continuing lack of detail and that progress would be hampered by a raft of new consultations and reviews of individual initiatives, including the promise to install “smart meters” in every home and testing new carbon capture and storage technologies.

Ed Miliband, the shadow energy and climate secretary who formerly held Huhne’s job, accused his successor of going “backwards not forwards” on several policies, including delays caused by further consultation on incentives for renewable heat, cutting promised funds for the green investment bank, abandoning some renewable energy targets, and comments by Huhne’s Conservative energy minister, Lord Marland, that “there should be no dramatic increase” in onshore wind turbines. Huhne’s Department of Energy and Climate Change also announced two weeks ago that it was cutting spending by £85m including £34m of support for low-carbon technology.

Funding for many policies announced today will also depend on the outcome of a tough autumn spending review.

“Any fair-minded person looking at this statement will conclude that it is a huge disappointment – a huge disappointment to industry, to the country as well,” added Miliband.

Huhne said public spending had to be slashed because the Labour government departed – in the words of outgoing Treasury secretary Liam Byrne – with “no money left”.

“I don’t think he [Miliband] does the cause of progressive politics or green politics any good if he believes there’s a bottomless pit [of money],” added Huhne.

Responding to big projected increases in energy bills, the Confederation of British Industry (CBI) said that, while business accepted there would be increased costs, it was concerned that mooted government ambitions for a higher target for renewable energy would push prices even higher, and urged ministers to help high energy users who were competing in international markets, such as steel companies. Other businesses could pass on the higher bills to customers, said Matthew Farrow, the CBI’s head of energy.

The projections assumed fossil fuel prices remain level at approximately US$80 (£51.46) a barrel of oil. Business bills would rise by less – and domestic bills be cut – if oil prices rose by the much higher estimates of the International Energy Agency or the US government, because of energy efficiency policies, said Huhne.

“The new study shows that a high-tech low-carbon future is within our grasp but it won’t be achieved without massive public and private investment and a detailed plan,” said Greenpeace executive director, John Sauven. “Right now it’s not clear that ministers are committed to unlocking that investment, and without it any plan is worthless.”

http://www.guardian.co.uk/environment/2010/jul/27/huhne-wind-nuclear-energy