The U.K.’s plan to build new power plants and cut pollution will be the main driver behind a jump of almost 20 percent in bills by the end of the decade, according to the utility RWE AG.
Policies that spur a low-carbon economy such as a tax on emissions and subsidies for renewable energy will cause the average household electricity bill to rise to 1,487 pounds ($2,244) in 2020 from 1,247 pounds now, RWE’s unit operating in Britain said in a report.
The study adds fuel to the debate over the cost of energy in the U.K., where energy suppliers including RWE and SSE Plc garnered criticism from consumer groups such as comparison website uSwitch Ltd. for reporting higher profits as bills increase. Britain needs to replace the fifth of its power generation that is scheduled to retire within 10 years. It’s seeking to tap cleaner sources of energy such as wind and solar, funded by raising the cost of power for consumers.
“Government policy is rightly delivering the transformation we need to address the U.K.’s poor housing stock and encourage investment required in new infrastructure,” said Paul Massara, chief executive officer at RWE Npower Plc. “But achieving these aspirations comes at a cost, and this is what needs to be clearly communicated to consumers.”
Massara urged government and energy companies to be clearer about reasons behind bill rises to help consumers curb use, because suppliers control only about 16 percent of a bill.
The costs of policies such as requiring energy companies to improve home efficiency are expected to rise 78 percent by 2020, while upgrading networks to accommodate new low-carbon projects such as wind farms will add a further 114 pounds to bills by that year, a 124 percent increase from 2007, RWE said.
The portion of bills spent on gas and electricity will decline to 35 percent from 45 percent now as policy and network infrastructure take up bigger shares, it said.
RWE’s forecasts are for a greater rise in household energy bills than the government predicts. The Department of Energy and Climate Change said in March that the average consumer bill for power and gas will rise 6 percent to 1,331 pounds in 2020 from about 1,255 pounds this year, excluding inflation.
The government predicts that the annual 286-pound cost of renewable energy subsidies in 2020 will be outweighed by 452 pounds worth of savings created by policies to make electrical products more efficient, insulate homes and install more efficient boilers and smart meters to monitor energy use.
RWE said DECC’s figures hinge on “ambitious” energy efficiency targets being achieved curbing consumer use. The figures in the RWE report assume energy use doesn’t decrease.
“We actually think people will start saving,” with the introduction of measures such as smart meters enabling consumers to monitor power use, Massara said today at a conference. “Whether they get to the levels DECC say, we don’t know.”
Greg Barker, the government minister for energy and climate change, said it’s global gas prices and not green energy policies that have the biggest impact on power bills.
“That is why it is vital we crack on with securing investment in a diverse energy mix that includes renewables and new nuclear, as well as gas,” Barker said in a statement.
Government policies are keeping bills 65 pounds lower today than if no action was taken. They will be 166 pounds lower than they would be in 2020 as a result of its regulation, he said.
RWE will publish the report every six months looking at the drivers behind energy costs and impacts on business and homes.