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 288.

    I must be missing something with all this.
    A quick check here
    Shows that on the coldest night so far this winter, wind is generating a mighty 1.4% of our electricity!

  • rate this

    Comment number 287.

    What does anyone expect from our successive governments?

  • rate this

    Comment number 286.

    253 Rizzo: I often hear this claim that DC will lose the next election. But whatever replaces this lot will just become another "lot" that we'll glad to see the back of.
    I vaguely remember promises at the privatisation of energy supply that competition would keep prices down. Yeah...

  • rate this

    Comment number 285.

    The one thing that seams to be missing is how are we going to generate the power required to run all the electric cars, buses, trains the government want us to use in order to reduce CO2 emission. we are going to need 100's of extra power stations not less. These will have to be nuclear as our base load will be very large. Building gas power stations will defeat the object of electric transport.

  • rate this

    Comment number 284.

    As long as every penny of wealth raised stays within the UK economy, I don't care what you do with it.

    I often get the impression that everything interesting and innovative that occurs inside the UK ends up sucking wealth out of our country and into another's.

    A company that sells for less than they buy will never flourish; regardless of how big and sturdy their infrastructure is.

  • rate this

    Comment number 283.

    @278. Eddy


    If A's use of fossil fuels (or uranium) causes B's land to be destroyed through inundation, desertification etc, this is evidently a tort. Existing legislation is adequate, & property rights are simply waiting to be enforced or protected.

    The assumption that individuals must leave it to Govt to tackle the perceived threat of climate change is a product of dependency culture.

  • rate this

    Comment number 282.

    I live in 1 of 5 high rise blocks of flats which are in the process of having biomass boiler/heat exchangers being installed. Mine was fitted today, the hot water and heating is generated with wood pellets. Yesterday I sat here in thermals. Today bermuda shorts!
    By 2020 I could be back to square one. Thermals, a woolly hat and a bottle of vodka to keep me warm. Brrrr!

  • rate this

    Comment number 281.

    8 Minutes ago
    Time now to give grants to demolish inefficient Victorian houses and replace them with environmentally friendly homes?
    I would put mine up as a start

    ....... I bet your inefficient Victorian house will still be standing after all the environmentally friendly new houses are long gone. Nothing is built to last nowadays.

  • rate this

    Comment number 280.

    We should be granting licences for shale gas extraction now and converting coal fired plant to gas. This will reduce GHG emissions and reduce the cost of energy.

  • rate this

    Comment number 279.

    I wondered what would the "Bad News Day" buried under Leveson.

  • rate this

    Comment number 278.


    " rights to a climate unchanged by human activity should be protected by tort litigation on the basis that strict liability is appropriate..."


    You do realise that not only is nuclear to be taxpayer subsidised, but (for other adverse effects) will be given statutory immunity to the sort of action you suggest, I take it?

  • rate this

    Comment number 277.

    Fukushima and Chernobyl were very old when their incidents occurred. The first suffered awful bad luck, and those events events will NEVER happen in the UK. The 2nd was badly maintained Soviet engineering, that they were experimenting on at the time, not part of its normal cycle. Nuclear is the way forward, & we must invest in fusion. I'm not that keen, but it's better than the alternatives.

  • rate this

    Comment number 276.

    Can our government please force these utility companies to spend some of the billions of pounds profit instead of hiking the prices up for the consumers please. £110bn split 6 ways & they'd still make £10bn+ profit. Oh i forgot. Our government are corrupt and probably taking backhanders left, right and centre so joe public has to foot the bill again.

  • rate this

    Comment number 275.

    So here's the deal, let's all be greener and lower our fuel consumption. Sounds great doesn't it? Unfortunately a reduction in consumption is going to hit the profits of the greedy power generators who will offset their losses by increasing the aleady obscene tariffs. In other words, we're all going to be paying a lot more than we do now for a lot less.

  • rate this

    Comment number 274.

    how do I feel cheated?
    Seem to remember Cameron assuring us all that energy bills would fall, I use oil for heating and that just keeps getting dearer. I had hoped that if the electricity came down just a bit it would i'm held up by wind farm ( that's a nonsense name) transportation while above the beautiful scenery is being disfigured. And I'm lumbered with a big bill, cheated me.

  • rate this

    Comment number 273.

    260.Sam Tan
    4 Minutes ago
    If the ConDems are so green orientated why don't all the ministers including PM change to a Tayota Prius (like M Houland in France) and with any foreign dealings do it via Skype/video link!!

    May have something to do with the Prius not being as eco-friendly as Toyota marketing would have us beleive. But good point using Skype/Video link.

  • rate this

    Comment number 272.

    Decisions like this should not be made at the expense of the general public. In the long term the utility companies will make the money back from new power stations etc. Afterall aren't the utility companies private and not public. Also the amount of money utilities have made since privatisation by doing no serious long term investment. You only have to see what happened when the water ran out.

  • rate this

    Comment number 271.

    We the UK will never get out of this recession if power prices are high. Do you think China care? "NO". What is the piont of us going green ? , all that will be put to waste when IRAN start tetsing NUCLEAR BOMBS.
    MR.TRUCULENT, says "Live Today - Die tomorrow". I dont care about the earths future . I Have alredy PAID my Taxes, my childrens children havent.

  • rate this

    Comment number 270.

    Talking percentages....95% of greenhouse gas is water vapour, a big chunk of the rest is due to farm animals, and the other slither is industry.

    Eco-mentalists can't seem to think in a geological time frame. As far as the planet is concerned....we humans have just arrived!

    The planet is very very old indeed and the forces of nature are way beyond our comprehension and influence.

  • rate this

    Comment number 269.

    We need to get over the short term costs and short term thinking. Always going for the cheapest has bedevilled our politics and ended up costing more longterm. Energy security is the main issue. Diverse supply & lower hostage to fortune to suppliers abroad. If it was the licence fee they would be saying only £2 a week or 28p a day. To ensure the power stays on into the future for less, very cheap


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