RWE Says U.K.’s Clean Energy Program to Boost Power Bills

The U.K.’s plan to build new power plants and cut pollution will be the main driver behind a jump of almost 20 percent in bills by the end of the decade, according to the utility RWE AG (RWE).

Policies that spur a low-carbon economy such as a tax on emissions and subsidies for renewable energy will cause the average household electricity bill to rise to 1,487 pounds ($2,244) in 2020 from 1,247 pounds now, RWE’s unit operating in Britain said in a report

The study adds fuel to the debate over the cost of energy in the U.K., where energy suppliers including RWE and SSE Plc (SSE) garnered criticism from consumer groups such as comparison website uSwitch Ltd. for reporting higher profits as bills increase. Britain needs to replace the fifth of its power generation that is scheduled to retire within 10 years. It’s seeking to tap cleaner sources of energy such as wind and solar, funded by raising the cost of power for consumers.

“Government policy is rightly delivering the transformation we need to address the U.K.’s poor housing stock and encourage investment required in new infrastructure,” said Paul Massara, chief executive officer at RWE Npower Plc. “But achieving these aspirations comes at a cost, and this is what needs to be clearly communicated to consumers.”

Biggest Cause

Massara urged government and energy companies to be clearer about reasons behind bill rises to help consumers curb use, because suppliers control only about 16 percent of a bill.

The costs of policies such as requiring energy companies to improve home efficiency are expected to rise 78 percent by 2020, while upgrading networks to accommodate new low-carbon projects such as wind farms will add a further 114 pounds to bills by that year, a 124 percent increase from 2007, RWE said.

The portion of bills spent on gas and electricity will decline to 35 percent from 45 percent now as policy and network infrastructure take up bigger shares, it said.

RWE’s forecasts are for a greater rise in household energy bills than the government predicts. The Department of Energy and Climate Change said in March that the average consumer bill for power and gas will rise 6 percent to 1,331 pounds in 2020 from about 1,255 pounds this year, excluding inflation.

The government predicts that the annual 286-pound cost of renewable energy subsidies in 2020 will be outweighed by 452 pounds worth of savings created by policies to make electrical products more efficient, insulate homes and install more efficient boilers and smart meters to monitor energy use.

 

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