Energy Bill to create 'low carbon economy', says Davey


Energy Secretary Ed Davey says the Bill will transform the energy landscape

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Energy minister Ed Davey has unveiled the government's much-trailed Energy Bill, setting out the roadmap for the UK's switch to "a low-carbon economy".

Energy firms can increase the "green" levy from £3bn to £7.6bn a year by 2020, potentially increasing household bills by £100.

But big, energy-intensive companies could be exempt from the extra costs of the switch to renewable energy.

There are also proposals for financial incentives to reduce energy demand.

The "transformation" will cost the UK £110bn over ten years, Mr Davey said.

He told MPs: "Britain's energy sector is embarking on a period of exceptional renewal and expansion.

"The scale of the investment required is huge, representing close to half the UK's total infrastructure investment pipeline."

The government's plan formed the "biggest transformation of Britain's electricity market since privatisation," he said.

Measures proposed in the Bill and consultations include:

  • Household energy bills to rise £100 on average by 2020
  • "Green" levy charged by energy firms to rise from £3bn to £7.6bn
  • Switch to clean energy to cost £110bn over ten years
  • Bill aims to encourage investment in low-carbon power production
  • Energy-intensive companies may be exempt from additional charges
  • Possible financial incentives to reduce energy consumption

Mr Davey said government policy was "designed specifically to reduce consumer bills", arguing that without a move to renewable energy, bills would be higher because of a reliance on expensive and volatile gas prices.


The government has unveiled plans to exempt some of Britain's biggest industries from charges for clean electricity.

The Energy Bill confirms that households will be expected to pay about £100 a year on average to get more power from nuclear and renewables.

But it looks as though energy intensive firms won't have to pay the extra charges. It's feared that if their energy bills rise too high, they'll move manufacturing jobs abroad.

The move may prove controversial with consumer groups.

The Bill confirms that households would provide £7.6bn of subsidy to nuclear and renewables by 2020 to keep the lights on and to meet targets on reducing emissions of greenhouse gases.

The government says the investment will shield the UK from volatile gas prices and force down costs in the long run.

But ministers have also announced that some of biggest industrial polluters in the UK - like steel and cement - may not be asked to pay extra. These global firms threaten to take their jobs elsewhere if power bills rise.

The government has recognised that if you are trying to cut global emissions of carbon, it's futile driving away firms to pollute somewhere else. But many households may wonder why they're being forced to pay extra whilst big firms are not.

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The Energy Bill aims to move the UK's energy production from a dependence on fossil fuels to a more diverse mix of energy sources, such as wind, nuclear and biomass.

This is to fill the energy gap from closing a number of coal and nuclear power stations over the next two decades, and to meet the government's carbon dioxide emissions targets.

By allowing energy companies to charge more, the government hopes they will have the confidence to invest the huge sums of money that are needed to build renewable energy infrastructure such as windfarms.

But the opposition said that investment in renewable energy had fallen under the coalition.

"The reason that's happened is because of the uncertainty the government has created - that's why firms have put investment on hold, or scrapped it altogether," said shadow energy and climate change secretary Caroline Flint.

She added that the absence of a carbon cap for the energy sector for 2030 further undermined investment in renewables.


But in a consultation paper published alongside the Bill, Mr Davey said energy-intensive industries, such as steel and cement producers, would be exempt from additional costs arising from measures to encourage investment in new low-carbon production.

"Decarbonisation should not mean deindustrialisation", Mr Davey said.

"The transition to the low carbon economy will depend on products made by energy intensive industries - a wind turbine for example needing steel, cement and high-tech textiles.

"This exemption will ensure the UK retains the industrial capacity to support a low carbon economy."

Without the exemption, the government fears big companies would cut jobs and relocate abroad.

Reducing demand

The government proposals to reduce electricity demand include financial incentives for consumers and businesses alike.

Shadow energy secretary Caroline Flint says the bill will see consumers will facing higher prices

For example, firms could be paid for each kilowatt-hour they save as a result of taking energy-reduction measures, such as low-energy lighting.

Householders and businesses could be given discounts and incentives to replace old equipment with more energy-efficient versions.

The government believes a 10% reduction in electricity demand could save £4bn by 2030.

But research by management consultancy McKinsey suggests there is the potential to reduce demand by as much as 26%, equivalent to 92 terawatt-hours, or the electricity generated by nine power stations in one year.

Audrey Gallacher, director of energy at Consumer Focus, said: "The government's commitment to reduce energy demand through incentives for consumers and businesses is welcome.

"But it will come at a cost - which again will be passed onto customers."


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  • rate this

    Comment number 48.

    "The Planets Fine..get over it."

    Yes, you're right, it is fine, and it will still be fine when half our remaining land is underwater.

    Maybe you live on top of a hill and don't care.

  • rate this

    Comment number 47.

    • 38. “Why am I only charged 5% VAT on energy i use, but 20% vat on loft insulation”?

    If you hurry, you may be able to get your loft & cavity wall insulation for nothing under a Government grant, I’ve had mine done recently.

  • rate this

    Comment number 46.

    This is another one I don't really get. We can reduce carbon emissions (good, I support that), but with population growth the way it is, how long until we're back up to the same levels, but also using a higher amount of un-renewable resources, food and other energy? Short term fix, not a solution

  • rate this

    Comment number 45.

    Just had a thought. The Lib Dems let down the students to stay in power and now they have let down the consumer with regards to energy... If they had a compass that party would still not know where their morals are!

  • rate this

    Comment number 44.

    What are the chances that this "extra £100" on peoples bills turns into an "extra £300" when its implemented?

    More license for the energy firms to print money

    Thanks Tories for privatising the essential services that would be receiving the profits & not Germany, France & a whole host of foreign companies(oh & your friends too)

    A least we can make a pointless stand whilst China and USA ignore!

  • rate this

    Comment number 43.

    sigh... energy bills are only going to continue to go up as fossile fules continue to deplete. There is no magic solution to make energy cheap now and forever. The majority of commenters seem to want more dependance on fossil fuels now in order to bring the bills down, but this will just mean bigger rises in the future ! you are all so short sighted

  • rate this

    Comment number 42.

    Why does the BBC include, among those energy sources it asserts as "clean" nuclear power?

    In what way can Fukushima, Chernobyl, etc be said to be such?

    Why must the BBC implicitly state that the question is settled that it is, despite the glaring evidence of its dangers?

    I and many people just do not accept this, like a majority of e.g. Germans.

  • rate this

    Comment number 41.

    Okay, now we can all see the real purpose in the climate change debate, to force people to pay more in taxes. There is no other explanation. Climate change has been shown to be a non-event, so in order to fleece more money out of us the generating companies and government have resorted to lies to keep their cash-cow going.

  • rate this

    Comment number 40.

    Sensible thing would be to nationalise energy production and build tidal barages and hydroelectric, alongside biomass and energy-from-waste on a local/regional level. The investment would create jobs. As it would be done centrally, the burden could be spread across all taxpayers rather than the touted approach which will clobber the poor.

  • rate this

    Comment number 39.

    Granted oil will disappear and electricity is the only sustainable power source. But until there is a way to safely and effectively store electricity you may as well use the electricity to run the pump which extracts the oil so we can store it.
    Sustainability is not sustainable yet. Use money for storage e.g. gravity storage or cold temperature cells first. Then you only need 1/2 the wind farms

  • rate this

    Comment number 38.

    Some crazy comments here. Apparently there is no climate change, despite half the country being underwater right now, hurricane sandy half flattening the US... the comments section must be filled with climate experts?

    The govt is over-complicating matters. Why am I only charged 5% VAT on energy i use, but 20% vat on loft insulation?

  • rate this

    Comment number 37.

    If we shut down all our power stations, stop all our industrial production, and go back to living by candle light, China will continue to increase its carbon output each year by more than we save. This is national suicide to satisfy a a group of "green" lunatics bent on taking us back to the Dark Ages. Climate change is natural and irreversible. The sooner politicians wake up to this the better.

  • rate this

    Comment number 36.

    The whole system is corrupt.

    Energy companies put bills up immediately the wholesale price goes up, but never bring it down when it falls.

    Politicians lie to us when canvassing at election time and never keep their promises.

    We need a new style of the people...for the people.

    Energy companies ripping us off should be closed down and fined.

  • rate this

    Comment number 35.

    Sadly there is no point in cutting emmisions. The oil/coal we "save" will still be mined and burned, just be someone else in another country. Mankind will simply not stop burning oil and coal until there is none left. So me getting a bigger bill in the meantime is pointless and annoying, and I'll vote accordingly.

  • rate this

    Comment number 34.

    "For example, firms could be paid for each kilowatt-hour they save as a result of taking energy-reduction measures, such as low-energy lighting."
    I do not understand why taxpayers/bill-payers should subsidise businesses too stupid not to have already switched to the "right kind" of light bulbs, or to turn their lights out after hours. Another tax- deductable scam in the offing?

  • rate this

    Comment number 33.

    When my local chippy needs new infrastructure (a new fryer) the price of a chip barm with gravy stays the same and the new equipment is paid for out of the profits made in the past.




    Nothing else!

  • rate this

    Comment number 32.

    Great, our tiny island can go "green" whilst countries like China and America couldn't care less. Our output is merely a particle in the atmosphere if you will, compared to what their countries pump out.

    Guess what, we can't afford it. I don't understand why the Government tries to deliberately g1mp this countries competitiveness at every single turn.

    Another note. G1mp... a swear word? Really?

  • rate this

    Comment number 31.

    The real answer to the problem of keeping warm is to insulate our homes much better than we do now. We need to change the way our homes are built. Brick and stone conduct heat away very efficiently and the result is freezing properties.

    There should be investment into cheaper construction materials that offer greater insulation, especially as there could be a building boom around the corner

  • rate this

    Comment number 30.

    I do my bit and use low energy light bulbs to help,the planet , and China opens a coal fired power station every week so until these huge polluters are brought into line, please leave me alone.

  • rate this

    Comment number 29.

    Great, more cost to pay for something (or is it) I couldn't care less about.

    Over population is far more important.


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