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Government’s Boosting Green Energy, But…

But they need to finish the job they started

by Erik Bichard

Guest-blogger Dr Erik Bichard, Professor of Regeneration and Sustainable Development at the University of Salford and Energy Forecaster, looks at the implications of the Energy Bill and investment in low carbon energy for business energy bills.

The government’s announcement that it will require energy companies to invest nearly £10bn in low carbon energy generation by 2020 will have a significant impact on business energy bills. This is because the energy companies will be allowed to pass this cost to their customers. There are wild predictions about how much this will add to an average bill, but rough estimates based on domestic bills suggest that this could increase the average energy cost of a business by around 5%. Indeed that is in addition to any normal inflationary pressures falling on energy bills.

However, before the howls of protest begin it is worth remembering a few things.

First, the £10bn figure covers both renewables and nuclear which is considered as a low carbon technology. We don’t know as yet what the split between these will be although we were told some time ago that the government would not be putting a penny of public money into the new wave of reactors. Those who hate wind turbines but love nuclear will therefore be conflicted in their opposition to paying for the combined fossil-fuel reduction programme.

Next is the need to resist the temptation to react to the first half of the announcement (the implications of the investment) and ignore the downstream consequences. If the investment decarbonises the turbulent fossil fuel aspects of the electricity market and makes the UK less reliant of fluctuating imports then energy bills will go down not up.

Finally, the announcement that more money will be going into the low carbon sector will provide the stability investors have been seeking for years. But the Chancellor also postponed a decision to set a target to totally decarbonise the UK electricity sector. If anyone is celebrating this they should think again as this has the potential to undo the good work of the cash injection.

Whatever the outcome, the market is crying out for certainty, and business should add their voices to calls for the Treasury to set some firm dates and finish the job they have now started.

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