Energy Bill 'a path to low-carbon economy'

29 November 2012

The government's Energy Bill, mapping out the path to a low-carbon economy, has been unveiled to MPs – and it could cost every household an extra £100 a year.

Energy minister Ed Davey outlined details of the Bill in the House of Commons, telling MPs that it would allow energy firms to increase the "green" levy from £3bn to £7.6bn a year by 2020, potentially increasing household bills by £100.

But big, energy-intensive companies could be exempt from the extra costs of the switch to renewable energy.

And there are also proposals for financial incentives to reduce energy demand.

Davey told MPs: "Britain's energy sector is embarking on a period of exceptional renewal and expansion.

"The scale of the investment required is huge, representing close to half the UK's total infrastructure investment pipeline."

The government's plan formed the "biggest transformation of Britain's electricity market since privatisation," he said, adding that,government policy was "designed specifically to reduce consumer bills", and arguing that without a move to renewable energy, bills would be higher because of a reliance on volatile gas prices.

The Energy Bill aims to move the UK's energy production from a dependence on fossil fuels to a more diverse mix of energy sources, such as wind, nuclear and biomass.

By allowing energy companies to charge more, the government hopes they will have the confidence to invest the huge sums of money that are needed to build renewable energy infrastructure such as windfarms.

The "transformation" is expected to cost the UK £110bn over 10 years.

But opposition MPs said that investment in renewable energy had fallen under the coalition.

"The reason that's happened is because of the uncertainty the government has created - that's why firms have put investment on hold, or scrapped it altogether," said shadow energy and climate change secretary Caroline Flint.

She added that the absence of a carbon cap for the energy sector for 2030 further undermined investment in renewables.

But in a statement published alongside the Bill, the energy minister said energy-intensive industries, such as steel and cement producers, would be exempt from additional costs arising from measures to encourage investment in new low-carbon production.

"Decarbonisation should not mean deindustrialisation", he said. "The transition to the low carbon economy will depend on products made by energy intensive industries - a wind turbine, for example needing steel, cement and high-tech textiles.

"This exemption will ensure the UK retains the industrial capacity to support a low carbon economy."