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No Clarity On How Government's Green Investment Pledge Will Affect Household Energy Bills

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ENERGY BILLS
The impact of the government's energy bill on customers' finances is still unclear | PA

Energy experts have admitted it is too difficult to say how the government's push for low-carbon infrastructure investment will affect household energy bills.

The government released some details about the Energy Bill on Friday, including a £7.6 billion pledge for low-carbon electricity infrastructure by 2020, but there has been a suggestion in some of the press that household bills are set to rise to pay for it.

Common figures pitched this morning were between £100 and £170 a year, but a sustainable energy professor told Huff Post UK these figures were likely to be exaggerated.

Professor Erik Bichard, professor of sustainable development and advisory panel member of EnergyForecaster.co.uk, said the increase to bills was more likely to be much lower.

"It's in the interests of the anti-renewables brigade to big up the figures - I'd have thought the figure would be nearer £60 a year, plus inflation," he said.

Kate Rose, head of energy at Confused said the two core reasons for existing high prices were wholesale costs and government intervention with things like energy efficiency and investment in infrastructure.

"The effect on household energy bills is extremely unclear and difficult to predict in that with a greater investment in our own generation capability we will get greater security over supply and wholesale price as a consequence," she said.

"The upside is we'll know what we are getting ourselves into, as this investment will bring clarity over our own supply but mean we will buy less from imports. Imported energy is subject to world pricing and could be either cheaper or more expensive depending on the market at that time.

"Green energy is expensive but with the government committing to targets about carbon reduction, it is a necessary requirement. We believe that prices will rise but closer to the lower figure because of the contracts for difference announced in the energy bill and the political pressure to keep prices down."

One risk analyst openly criticised the government for failing to remove the investment uncertainty however, adding that until the right incentives are offered to promote green energy, prices would continue to be high for households.

"Delaying the decision on the 2030 target until 2016 sends out rather mixed signals; on one hand the government recognises gas as a flexible supply source, but on the other it suggests that by 2030 there may not actually be a role for gas if we are to decarbonise the power sector," said Andrew Horstead, risk analyst for energy specialist Utilyx.

"No generator will invest millions of pounds into power plants that may get shut down in the near future. In the meantime we lose a huge chunk of baseload capacity over the next few years, which is not being replaced as we have no final word on nuclear and clean coal remains unproven.

"Tighter plant margins will push the energy prices higher...The government must ensure that the energy bill targets energy efficiency and gives the right incentives to lower demand; only then will energy bills come lower.”

What the providers say

On 19 November, small energy provider Good Energy announced it would offer residents in a two-mile radius of its wind farm cheaper energy bills and a £50 windfall payment - sparking a huge debate on Huff Post UK's message boards.

Juliet Davenport, chief executive and founder of Good Energy, told Huff Post UK: "The fact is that it’s the rising cost of gas that has pushed up energy bills. Investment in renewables will stop the UK’s gamble on gas, and benefit consumers in the long run by providing security of supply and reducing our reliance on expensive fossil fuels."

But the UK's mainstream energy providers found it more difficult to comment on how the impending changes could affect customers' bills.

Volker Beckers, RWE npower's group chief executive said the government's announcement was a pragmatic step forward, but didn't comment on the effect on pricing.

Instead, he offered: "RWE and npower still reject the need for a capacity mechanism to enable investment in fossil-fuelled generation, and ask government to ensure that those investors who moved early to invest in Britain, without the need for further support, are not penalised for doing so.”

“Britain’s energy sector is the beating heart of our economy and the lifeblood of modern society. If we fail to make energy policy simple, clear and effective for the long-term, our economy and our wellbeing will suffer. Today's announcement is a small step forward, but we need to see further efforts on clarity and stability.”

bills

Energy bills from all of the big six energy providers went up in October 2012

An SSE spokesman added: "It is clear that when the energy bill finally arrives there will still be a lot of detail to be worked through before the full implications can be understood. It is critical that this legislation is formulated in a way that unlocks the required levels of investment while also serving the best interests of consumers.

"What the industry and the country needs right now is clear policy direction. We urge the government to move quickly to firm up these commitments and fill the vacuum of uncertainty, so that investors like SSE can make the firm investment decisions needed to stimulate jobs and growth in the UK."

Tony Cocker, chief executive of EON UK, said his firm had consistently argued for the bill to give customers value and provide a robust basis for investors.

"We are pleased the government has set out a clear position on key issues and it looks as though the bill is a good move in the right direction," he added.

Meanwhile Keith Anderson, chief corporate officer at ScottishPower said legislation to bring forward a new incentive mechanism for investment in the much needed large scale low carbon investment was vital.

"Clearly we're looking forward to receiving the detail - it is inevitably a complex system and we all need to work together with the government on designing a workable approach and delivering it on time," he said.

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Filed by Charlie Thomas