E.ON tells ministers to come clean about green energy's cost to public 

Senior energy executives have called on ministers to come clean about the costs of the Government’s ambitious plans for a green energy revolution.

Government ministers have eagerly publicised in recent months tough new carbon reduction targets and an array of initiatives that will be needed to meet those demands, such as biomass and wind power generation and carbon capture and sequestration technology – “green” measures that play well with the electorate.

They have remained conspicuously quiet, however, about the inevitable knock-on effects this will have on household energy bills, content to stand by as energy companies are lambasted for rising bills.

But signs are emerging that energy companies are tiring of taking the flak for higher tariffs that are increasingly a direct result of government policy. Paul Golby, the head of E.ON UK, said: “We need our politicians to stand up to the mark a bit more and be honest about the costs. It doesn’t come for free. Energy is going to cost more in the future.”

It is a widely acknowledged fact within the industry that energy bills will soar in the coming years as more expensive low-emission power plants are built. If all of the Government’s goals are to be met, industry would have to conservatively invest more than £100bn by 2020 – the date by which the country has pledged to cut CO2 emissions by 20 per cent.

The plan that John Hutton, the Secretary of State for Business Enterprise and Regulatory Reform (BERR), unveiled last year for wind energy alone will cost at least £66bn. That is according to the Government’s goal of having 33 gigawatts of wind capacity installed by 2020, at current rates of about £2bn for each gigawatt of wind capacity.

Another UK energy company source said: “We can’t have security of supply, sustainability and rock-bottom prices. The Government has deemed it necessary to go for more expensive greener options, but that means that energy is not going to get any cheaper.”

Under the EU carbon trading scheme, the Government has called for all emissions permits – now given away for free – to be auctioned in the next phase of the programme. This is expected to as much as double the price of carbon from its current level of just over €20 (£16) per tonne, a rise that will also be passed through to customer bills.

A BERR spokeswoman said: “The Government has taken the lead in the EU and globally in developing policies working within competitive energy markets, to drive the transition to a lower-carbon economy.

Our environmental policies within the energy markets – the EU Emissions Trading Scheme, the Carbon Emissions Reduction Target, and the Renewables Obligation – all have an impact on prices, and the overall impact has risen this year.”

In a separate development, AECL, the Canadian nuclear reactor designer, has dropped out of the Government’s reactor design review. That leaves Westinghouse, Areva of France and the US giant GE as the three remaining contenders to provide the reactors for the country’s next generation of nuclear power.

By Danny Fortson, Business Correspondent