Bloomberg News

U.K. Energy Laws May Raise Company Bills 20% in 2020, Huhne Says

November 24, 2011

Nov. 23 (Bloomberg) -- U.K. energy policies may raise power and gas bills for the heaviest corporate consumers by as much as 20 percent by 2020 as the government promotes measures to curb polluting emissions, Energy Secretary Chris Huhne said.

Efforts to boost renewable power and put a price on carbon will increase energy bills for the biggest users, Huhne told Parliament today. Depending on a company’s energy mix, annual charges are projected to rise to as much as 20.9 million pounds ($32.4 million) from 17.5 million pounds, according to a document from Huhne’s Department of Energy and Climate Change.

“It is important that these industries play their part in the transition to a low-carbon economy,” he said, delivering the government’s annual energy statement to lawmakers in London. “But it is also important that they remain competitive.”

Huhne is tasked with ensuring Britain meets a domestic goal of cutting greenhouse-gas output in half by 2027 and a European Union target of deriving 15 percent of energy from renewables by 2020. U.K. utilities need to spend as much as 200 billion pounds to replace aging power plants and upgrade the electricity grid by 2020, according to energy regulator Ofgem.

The country’s most energy-intensive companies include chemicals maker Ineos Group Holdings Plc and Tata Steel Ltd. The Confederation of British Industries said in June that U.K. units of both manufacturers may be “uneconomical” after 2013 because of a planned carbon-dioxide tax of 4.94 pounds per metric ton of CO2, dubbed a “floor price.”

Get a Grip

“The analysis released today reinforces the urgent need for measures to safeguard the jobs and investment in Britain’s energy-intensive industries,” Steve Radley, policy director at EEF, a lobby group for manufacturers, said in a statement. “The government needs to get a firmer grip on the energy costs most directly under its control -- those arising from its own policies.”

Chancellor of the Exchequer George Osborne will present measures by the end of the year to lessen the effect on industry of climate-protection efforts, Energy Minister Greg Barker said today in an interview, adding that the country is learning from Germany’s approach.

Germany decided this year it will shut all its nuclear reactors by 2022, and plans to replace the plants with more renewable capacity and new coal- and gas-fired power stations.

De-carbonize Economy

“We’re very clear that while we have a very ambitious plan to de-carbonize the British economy and put the U.K. at the forefront of renewables, de-carbonization must not mean deindustrialization,” Barker said.

Without the U.K.’s new energy policies, annual bills for the biggest users would range from 9.3 million pounds to 17.4 million pounds in 2020, according to the government. The policy measures push that projection to 9.4 million pounds to 20.9 million pounds.

Medium-sized businesses face a 19 percent increase in bills, according to the study, while household bills are set to be below previously projected levels, “softening the blow” of rising electricity and heating costs, Huhne said.

Previous estimates showed a 10 percent gain in typical annual household bills for gas and electricity to 1,379 pounds in 2020, according to the government. Measures introduced to promote renewable power, insulate homes, make appliances more energy-efficient and fossil-fuel plants cleaner will have the effect of lowering the increase to 3 percent, Huhne said.

Renewables Obligation

All policies, which this year have added 20 pounds to the average home’s bill, will cut a net 94 pounds from the projected amount in 2020, the government said.

The U.K.’s renewables obligation certificate system, which compels utilities to buy power from large-scale wind farms, biomass plants and wave and tidal-energy projects, will add 48 pounds to household bills in 2020, while feed-in tariffs, the premium rates paid for clean energy from smaller projects, will add 6 pounds, according to the government. Support given to poorer homes will add 75 pounds to average bills, it said.

At the same time, EU policies aimed at making electrical appliances and light bulbs more efficient will cut 158 pounds from bills, Huhne’s “Green Deal” program to insulate homes will slash 53 pounds, and the introduction of so-called smart meters will help cut 37 pounds, according to the government. Smart meters provide live readouts of energy use and transmit the information to utilities, providing more accurate billing.

The Green Deal, a government project allowing households to pay for home improvements through savings on energy bills, will support 65,000 insulation and construction jobs by 2015, Huhne said. In 2010, he said the program could expand the industry to 250,000 jobs in 2030 from 26,000 at the time.

--Editors: Amanda Jordan, Alex Devine

To contact the reporter on this story: Alex Morales in London at amorales2@bloomberg.net

To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net


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