Green energy to cost consumers £400 over next five years

Every British household will pay an average of more than £400 in higher bills over the next six years to pay for subsidies under controversial Government plans to hit green power targets.

The money will go solely to paying for otherwise uneconomic offshore wind turbines, onshore wind farms, biomass plants, landfill gas sites and hydro power plants, new figures show.

The first analysis of newly agreed prices paid to “green” generators, carried out by the Taxpayers’ Alliance, shows that the total subsidy will be nearly £22 billion by 2020.

The subsidies are paid for by consumers and businesses through their annual bills and passed to the green energy generators.

Half of energy bills are paid by business, with the other half by domestic consumers, and the total subsidy divided among British households equals £425 per household.

Many, however, will pay more because they have bigger bills.

As well as recouping the cost of renewable subsidies through domestic bills, households will also foot the bill for the carbon floor price tax and the Energy Company Obligation efficiency scheme, where suppliers are supposed to fit out homes with roof insulation and better boilers.

The other schemes suggest the possibility of further increases to the cost of electricity.

The calculation comes amid mounting political pressure over the cost of “green” subsidies, with George Osborne, the Chancellor, and Ed Davey, the Energy Secretary, said to be at loggerheads over other aspects of attempts to reduce the amount of carbon produced to generate electricity.

The Taxpayers Alliance said the huge bill showed both the failure of the Government’s energy strategy and the folly of Labour leader, and former energy secretary, Ed Miliband’s pledge to freeze domestic gas and electricity bills at the same time as sticking to the “green” targets.

Its analysis shows that almost £2 billion was spent in renewable subsidies in the 2012-2013 financial year.

This will rise to an estimated £5.3 billion by 2018-2019, adding another £60 to every annual domestic electricity bill in the country and increasing business costs dramatically.

Over the six years the total subsidy will be £21.9 billion, the Taxpayers Alliance said, with wind farms accounting for the majority.

Matthew Sinclair, Taxpayers Alliance chief executive, said it was clear the Energy Bill had failed and that the vast amounts of money earmarked for renewable generation should instead be used to support research aimed at bringing down the cost of green power.

He said: “Targets that require massive investment in the energy sector, to install expensive technologies like offshore wind turbines on an enormous scale, will always mean profits for energy companies and much higher prices for consumers.

“If the Government are serious about easing the pressure on people’s living standards, they need to take action and scrap lavish renewable energy subsidies.

“And it is a joke for Ed Miliband to pretend he is taking on the Big Six on behalf of consumers when he is proposing to keep the targets in place. If politicians are serious bout helping families with struggling bills, then they need to do something about dysfunctional and painfully expensive energy policies.”

The Taxpayers’ Alliance calculated the figures by analysing for the first time the planned increase in renewable capacity over the coming years and the official strike price agreed by the Government for the power that will be produced.

The strike prices guarantee renewable power generators a far higher power price than the prevailing cost on the wholesale energy market.

In 2014-2015, the strike prices for onshore wind will be £100 per megawatt hour (MW/h), the standard unit of power production.

Offshore wind producers will be paid £155 per MW/h. Electricity is sold “wholesale” by producers to firms which supply homes and businesses, including the so-called “Big Six”, which includes the largest domestic power firms, but the predicted wholesale price is £50 per MW/h, far less than the “strike price”. The difference has to be made up by the supply firms, who will pass it direct to bills.

Dr Lee Moroney of the Renewable Energy Foundation, which is critical of the “green” energy plans, said: “Government subsidies which are added to electricity bills in order to meet over ambitious EU climate change targets are complex, opaque, and very expensive for the consumer.

“The subsidy costs are set to increase significantly and will last 15 to 25 years. The scale of the consumer costs is shocking and senseless in view of the fact that UK greenhouse gas emissions could be reduced faster and more economically by less extravagant measures.”

Britain’s ’Big Six’ energy suppliers have lined up this year to claim that environmental and other Government levies are the main reason why domestic gas and electricity bills are set to rise yet again this winter.

In July, the head of npower, Paul Massara, said households would be paying £240 more a year for their power by 2020 to cover the cost of Government green policies.

Experts believe a price hike from one of the Big Six is imminent with estimates that bills will rise by as much as 10 per cent.

British Gas was last month rumoured to be preparing a price rise of 8 per cent, which would push its average dual fuel bills up by around £100 to record levels of almost £1,450.

The Taxpayers Alliance report comes just five months after the Sunday Telegraph revealed wind turbine owners were paid £1.2 billion in the form of consumer subsidies last year, the equivalent of £100,000 for every job in the wind farm industry.

However turbines have proved to be deeply controversial, with people living in areas where they are being built or planned often opposed to them. Complaints about appearance and noise have dominated local concerns, but critics also say that they will not solve a looming energy crisis caused by switching off older power stations and decommissioning nuclear generators, because they cannot generate power when it is not windy.

Other “green” methods have attracted other criticisms, with solar farms also proving unpopular in areas where there are large-scale projects planned, while others are expensive to build.

The report, seen by The Telegraph, comes just days after Business Minister Michael Fallon said it would be “unfair” to add further costs and green levies onto consumer bills.

His comments, at a fringe meeting at the Conservative Party Conference, were taken as the strongest indication yet that the Tories may pledge to scale back existing green policy costs. Mr Fallon said: “We shouldn’t put industry at a disadvantage against Europe and the US: for our manufacturers this would be assisted suicide.”

A spokesman for the Department of Energy and Climate Change said: “The Government is transparent about the impact of energy and climate policies on bills.

“It’s the global gas price, not green subsidies, that has primarily been pushing up energy bills. 60 per cent of the increase in household energy bills between 2010 and 2012 was caused by this. Investing in home grown alternatives is the only sure fire way of insulating our economy and bill payers from this volatility.

“In any case, our household energy efficiency policies are on average more than offsetting the costs of clean energy investment. By 2020 the average household bill will be £166 lower than it would be if we were doing nothing.”