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 108.

    Thanks 97. AtALossWithIdiots
    why dont the BBC pick up on this point? why arent share holders picking up this bill. If we calculated the entire cost and looked at the past 20 years reported profits/bonuses/shareholders pay they could have paid for it easily. Can anyone do that calculation? You know why they dont want wind power, coz yet again the energy companies will PROFIT in the end,its not on.

  • rate this

    Comment number 107.

    It seems the way to a low carbon economy is to price people out of buying fuel.

  • rate this

    Comment number 106.

    So once again, the poor and elderly will have to choose between feeding or eating?

    Rather than that, we should be nationalising our energy suppliers so that the fat cats and shareholders don't get all the money - do you really think a french owned company is going to invest in UK energy?

    If it costs too much to build stuff, we should be using prisoners and those on benefits.

  • rate this

    Comment number 105.

    "The government believes a 10% reduction in electricity demand could save £4bn by 2030" Woww £4bn in 2030. Anybody who lives for another 20 years will be rich. In 20 years £4bn will probably be worth about a 1/10th of what it is worth today.

  • rate this

    Comment number 104.

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

    And where will that money go? Not towards "saving the planet" that's for sure. It will line the pockets of bureaucrats & fatcats.
    You can't save the planet: People are selfish & they won't let you.
    Wasted time and money.
    Can't stop it. Better to PREPARE for it.

  • rate this

    Comment number 103.

    This bill is a way forward. Climate change denial will not change a thing. The planet could be stuffed anyway - in which case Gaia may take here revenge sooner than predicted. At least the shiny renewable technology we leave behind will stand sentinel to our gross stupidity. We could be the first species to consume its own life support system at this bickering rate!

  • rate this

    Comment number 102.

    Im a bit puzzled, first the PM announces all these energy firms will be forced to put all there customers on the cheapest tariff, now another scheme which is going to had more to our energy bills. The point is people are struggling to pay there bills and now more rises, The Energy market should be re nationalised.

  • rate this

    Comment number 101.

    Wake up Govt
    You've cried wolf far too often.
    Reading from the CO2 Bible doesn't work anymore.

    The data shows the consequences of this will be very severe.
    The Met Office data show no warming in 16 yrs
    True science in this field is being suppressed from the top in the persuit of taxation for BUST Govts around the world.
    Whats the price of petrol in Saudi or Dubi again ?

  • rate this

    Comment number 100.

    Well, watching Caroline Flint being interviewed about this bill, she made many off the cuff critisisms (as usual), then revealed that she hadn't studied the report in any detail.

    Caroline - please get a grip.

  • rate this

    Comment number 99.

    Why not tell the companies to go jump off a cliff and create a true public owned energy company and use the subsidies to build new power generation. Everyone owns an equal share and we all share in the profit. But no, the highly intelligent cabinet, of course probably advised by the energy companies try and convince us we need to pay for it. 100% windfall tax to build new supply. Problem solved.

  • rate this

    Comment number 98.

    96. adhominemtarget
    @51 The climate HAS always changed but never at the rate that it is at the moment. Also, don't confuse local weather with climate:
    Yet funny how those who believe totally in climate change WILL seize on isolated weather events (Katrina, Sandy, this weeks floods) when it suits.....

  • rate this

    Comment number 97.

    89. Rizzo. Good comment. Why aren't the shareholder paying for this? We may as well renationalise it would be hell of a lot cheaper. How much of the initial £100 a year is going in profit to the shareholders?

    Absolute joke!! Rip off Britain!!

  • rate this

    Comment number 96.

    @51 The climate HAS always changed but never at the rate that it is at the moment. Also, don't confuse local weather with climate: the medieval warm period was most noticable in the Northern Hemisphere but elswhere it was much colder. The global average is estimated to have been cooler than today.

  • rate this

    Comment number 95.

    @68 - Onshore wind power is competitive on cost, is low carbon, low impact, has good lifecycle returns and is only marginally less efficient than coal fired generation. It's also inherently flexible during periods of low demand (hence turbines not spinning when it's windy - this is due to the grid managing resources, not a fault of the turbines.)

  • rate this

    Comment number 94.

    Caroline Flint is definitely the top totty in parliament right now. :P imho of course.

  • rate this

    Comment number 93.

    Folk don't like the look of turbines, they look a hell of a lot better than 30 ft of water, let me tell you.
    So why are the ToryBoys standing in the way of windpower and solar in favour of gas and nuclear?

    Nothing to do with vested interests and shareholding i wouldn't think.

    Of course not.

  • rate this

    Comment number 92.

    Bill (86) the methane from cows/bovines is expelled from their mouths (FYI). and you are correct, it is the biggest contributor to the greenhouse effect ...

  • rate this

    Comment number 91.

    This is to pay for the investment that the energy firms should have already been budgeting for.

    I have reduced my energy usage considerably over the years but government keep getting more inventive in making sure i dont pay less .

    The national grid should have been being upgraded as we went along not all in one lump,that would have harmed the already excessive profit making private firms.

  • rate this

    Comment number 90.

    Carbon is not a climate driver. Carbon is something that can be taxed!

    The sun gets hotter....we get hotter. The sun cools down......we cool down.

    CO2 in the atmosphere lags behind world temperature increases by hundreds of years because of the big blue wobbly thing called the ocean.

  • rate this

    Comment number 89.

    This is getting ridiculous! These PRIVATE companies that own our energy supplies are PRIVATE COMPANIES. They should have invested some of that huge profit over the decades and been sharp enough to anticipate this issue. They are the ones paying themselves big bonuses instead of planning ahead. Now we have to foot the bill, does this mean we will own the infrastructure? are they private companies??


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