Energy firm warns bills to rise by more than government forecasts
- 16 July 2013
- From the section Business
Annual household energy bills by 2020 are likely to be £100 higher than government projections, says energy firm RWE Npower.
It says official predictions of future energy savings are over-optimistic and warns the annual average bill will be £240 above current levels by 2020.
The firm says it supports government plans to renew power networks and build more renewables such as wind and solar.
But it says there must be more honesty about the costs of this investment.
It comes as a new poll by Cardiff University suggests that the public is willing to pay extra for clean and reliable energy.
Both reports acknowledge, though, that the public does not trust energy firms or government - and both say trust must be restored if energy policy is to succeed.
In Npower’s case, the trust exercise starts with a publication setting out exactly how bills are likely to rise in order to renew the creaking energy supply system and install clean energy supplies.
The firm says it believes the government has underestimated the effect of this investment on bills, because its calculations rely on “heroic” assumptions about the energy individuals will save through efficiency and behaviour change.
This criticism has frequently been levelled at the government’s projections.
The firm warns that unless people strive much harder to reduce energy use, the average combined fuel bill in 2020 will be about £1,487 a year - that's £200 more than now and £100 more than the government projects.
The company says it is essential for energy firms - often accused of profiteering and misleading customers - to be honest about future bills.
The new chief executive of Npower, Paul Massara, said: “Energy costs are rising. This is an indisputable fact, and it’s time that all of us involved in energy in the UK are upfront about it.”
He went on: “We are very clear that we do not want to be critical of government - rather, we want to ensure customers have the facts, so that they understand that for this cost, they will get a low-carbon economy, security of supply and warm, insulated homes.”
He said his firm was calling for an end to the energy “blame game”.
The report is issued coincidentally as the academic body, the UK Energy Research Centre, warns that plans for a clean energy future risk being undermined by lack of trust.
A poll of about 2,500 people commissioned through Cardiff University suggests that the public is worried about dependency on fossil fuel imports (82%); keen to reduce use of fossil fuels (79%); supportive of power from the sun (85%) and wind (75%); and concerned about climate change (74%).
The report’s authors say people are willing to pay extra to obtain a stable energy supply. The lead author, Prof Nick Pidgeon, said people would also pay more overall to avoid sudden peaks in prices. He said the researchers had not tested specific figures in the poll because projections about future energy costs were “notoriously slippery”.
Keeping the lights on
“What’s interesting is that despite what you might see in parts of the media, it’s clear that very broadly the public want a long-term commitment to clean energy,” he told BBC News.
“But the trust issue is critical. We have seen protests round energy system developments like wind farms over recent years. There won’t be all the investment that’s needed on energy systems if the energy firms and the government can’t persuade people to trust them.”
He said young people dependent on electronic gadgets were very worried about the prospect of black-outs and willing to pay to avoid them.
But he envisages a Catch-22 in which the government and energy firms fail to deliver the energy future that people want, because the public don’t trust them.
The Association for Conservation of Energy is one body that does not trust the firms.
Its director, Andrew Warren, told BBC News that Npower's projections on energy savings could not be trusted: "The big energy companies have definite form, when they start warning that they can't deliver the energy savings schemes that government mandates at the price that government projects.
"They claim at the start that the scheme will cost them far more than the official forecasts, in order to try to minimise the size of the obligation placed upon them."
The government said its policies would keep the lights on and help to smooth bills by reducing dependency on the gas imports that have caused recent jumps in energy prices.
Greg Barker, Minister for Energy and Climate Change, said: “It is right that we have a grown-up discussion about the impact of energy investment. However, global gas prices, not green policies, have been primarily pushing up energy bills.
“In 2020, bills will be £166 lower than they would be if we left ourselves exposed to global price shocks, left our homes leaking energy, and left future generations to deal with climate change.”
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