U.K. Green Energy Plans Boost Power Bills 54% by 2020

Dec. 14 (Bloomberg) — The U.K. government’s effort to expand renewable energy generation will boost household electricity bills by 54 percent by 2020, according to a study by Bloomberg New Energy Finance.

The green energy program will account for about 40 percent of the increase with 28 percent more due to gains in wholesale power prices as the country shifts away from aging coal-fired generation, the London-based researcher said today. Grid upgrades account for most of the rest of the increase.

Prime Minister David Cameron’s government has trimmed subsidies for solar and wind power after a surge in installations. He’s concerned utilities such as SSE Plc and Centrica Plc have lifted energy costs for consumers, threatening to curtail a sluggish economic recovery.

“The U.K. is transforming its mix of generation, pushing renewables close to 30 percent by 2020, largely at the expense of coal, and with a greater dependence on rising gas prices,” Michael Lawn, head of power research at BNEF, said in the statement. “The only way households and businesses can mitigate the impact of higher electricity bills will be by improving energy efficiency.”

The average electric bill will top 699 pounds ($1,125) a year in 2020 compared with 454 pounds now, BNEF said in the statement. Electricity bills have risen more than 70 percent since 2005, mostly because of increases in the cost of natural gas and coal.

The government on Nov. 29 published plans to overhaul the power market as it aims for 15 percent of its energy to come from renewable sources by 2020. Its changes would spur investment in low-carbon power plants. It will support the building of gas-fired stations and the exploration of shale gas resources. Shale gas is unlikely to drive a large fall in gas prices in the U.K. to 2020, BNEF said.

Low-carbon policies currently account for less than 10 percent of a typical household electricity bill. By 2020 this will be 21 percent, said Fraser Johnston, a power analyst at BNEF.

To contact the reporter on this story: Louise Downing in London at ldowning4@bloomberg.net

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

More News >>