Plans to generate more UK electricity from renewables as part of moving to a low-carbon economy will add up to 17% to the energy bills of businesses consuming a medium amount of energy by 2020.

According to the Department of Energy and Climate Change (DECC) the financial impact of the policies in its Transition Plan, which outlines how each part of the economy will help achieve the 2020 target to reduce greenhouse-gas (GHG) emissions against 1990 levels by 34%, will add 15% to current energy bills for businesses over the next 10 years. Other measures, already announced by the government, will increase energy costs by a further 2% within a decade. DECC says that the lifetime cost to the power sector and heavy industry of the planned measures is between £47 billion and £53 billion.

The CBI said that the large increase was partly the result of the government focusing too much on wind energy at the expense of other renewable-energy sources. “Placing too much emphasis on wind power at the expense of other low-carbon forms of energy will increase prices more than necessary for many businesses. We want to see an energy policy that focuses on nuclear alongside wind, gas, and clean coal and other renewables,” director of business environment Neil Bentley told EiB. He also warned that some energy-intensive sectors, such as steelmaking and cement, would be hit particularly hard and that action would be needed to help them through the transition period, to prevent damage to the competitiveness of UK manufacturers.

The Carbon Trust said that the planned rise in energy costs should encourage companies to pursue efficiencies, however. “Using less energy is the simple step all businesses can take to reduce the impact of rising energy costs on their bottom lines. Our research shows that if all British businesses took cost-effective measures to use less energy, collectively they would cut their costs by a staggering £2.5 billion a year. That’s £2.5 billion being wasted on unnecessary bills,” commented Hugh Jones, director of solutions at the trust.

The UK has already cut its GHG discharges against 1990 levels by around 21%, and the Transition Plan plots how much each sector of the economy will contribute to reducing emissions over the next decade to meet the 34% target. Around half the annual emissions cuts between now and 2020 will be achieved by further greening electricity generation, says the government. It expects 40% of the electricity used in the UK in 2020 to come from low-carbon sources: 30% from renewables, with the rest from nuclear and clean coal.

In June, Andrew Duff, chief executive at RWE npower, warned that businesses and domestic consumers face significantly higher energy prices if the UK is going to meet its CO₂ targets (www.lexisurl.com/EiB940). “Whichever low-carbon energy technology we deploy, the price will be much higher than we are used too. We will have to get accustomed to significantly higher energy costs than in the past,” he told the audience at a CBI forum.

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