A truce over wind farms…but how long will it last? 

The Conservatives and Lib Dems are claiming a victory after striking an agreement paving way for a new generation of nuclear power stations and wind farms.

The peace deal, allowing £7.6 billion to be put on bills over the next eight years, follows a bitter split between Chancellor George Osborne and Ed Davey, the Energy Secretary, that threatened to tear the Coalition apart over the its green agenda.

At the heart of the fight, the Prime Minister and the Chancellor have been increasingly worried about the rising cost of energy to consumers, while the Liberal Democrats are very anxious to make sure the Coalition keeps its promise to be “the greenest government ever”.

Behind the scenes, the Prime Minister, Chancellor, Nick Clegg and Mr Davey fought out the issue in high-level meetings of their “quad” group. But tensions also spilled into the open following reports that Mr Osborne was doing his best to defeat the “environmental Taliban” and when his father-in-law, Lord Howell, suggested he is working to make sure environmental concerns are not the priority.

The Chancellor has promised that saving the planet will not come at the expense of putting companies out of business with excessive bills. And the temperature rose again when two Conservative ministers with sceptical views about onshore wind turbines were appointed in the reshuffle Owen Paterson as the Environment Secretary, and John Hayes as an energy minister.

Last night, Conservative sources claimed they have won the battle to keep green costs as low as possible, while making sure the lights stay on. They were saying that Liberal Democrats wanted the total costs on household and industry bills to be as high as £10 billion by 2020 – rather than £7.6 billion as agreed.

However, the fact remains that Ed Davey, the Energy Secretary, was successful in pushing through his reforms of the electricity market despite many backbench Conservatives arguing that renewables are an expensive low-carbon source of energy.

Official estimates suggest that bills will go up by an estimated £170 a year by 2030 under all the Government’s green and fuel poverty policies, with the contribution to nuclear and renewables making up £95 by 2020.

Liberal Democrat sources last night said the party is “extremely pleased” to have won support for the “really positive” reforms that will mean more wind farms and nuclear power stations are built.

Securing a concrete deal will come as a boost to Mr Davey, after he clashed with Mr Hayes, the new Conservative energy minister, who promised to bring an end to the rash of wind farms “peppered” all over the countryside.

It is also expected to be a big boon for jobs, with billions of pounds of investment needed to make sure closing coal stations are replaced with low-carbon sources.

Mr Davey did, however, compromise in other areas. The Chancellor managed to secure key concessions that mean Britain will have the option of continuing to build more traditional gas power stations into the next decade.

Mr Osborne threw out Liberal Democrat demands for the “decarbonisation” target that would have forced Britain to get all its power from green sources by 2030. In the final agreement, this will be decided in 2016 – after the next general election.

Green groups are furious that this “decarbonisation” target has been scrapped, with Andy Atkins, executive director of Friends of the Earth, saying Mr Osborne’s move “banged the final nail in the coffin of Cameron’s pledge to lead the greenest Government ever.

The lack of such a target also goes against the advice of the Committee on Climate Change, independent Government advisers, who warned that this will be necessary to help meet Britain’s international obligations on reducing emissions.

Mr Osborne also got an agreement that the UK will reconsider its “carbon budget” – another target on reducing carbon dioxide emissions – if it causes the causing the UK economy to lag behind other countries.

In another win for the Chancellor, he will promote a “gas strategy” that will make clear Britain is committed to maximising its fossil fuel resources. When this document is published alongside Mr Osborne’s autumn statement early next month, it could re-ignite the row with environmentalists again. And backbench Tories are still agitating for the brakes to be put on onshore wind generation, buoyed by Mr Hayes’s promise that “enough is enough”.

So although the Conservatives and Liberal Democrats have found a truce for now, it remains to be seen how long that will last.