Low-carbon efforts to "help" UK home power bills rise 54% by 2020 - BNEF

Dec 14, 2012 - Household power bills in the UK are expected to jump by an average of 54% by 2020 due to low-carbon policies and rising wholesale power prices as gas-fired generation replaces coal, Bloomberg New Energy Finance (BNEF) says in a study.

By comparison, UK consumer electricity bills have increase by over 70% since 2005, mainly as a result of rises in the prices of gas and coal feedstock, according to the analysis.

The average household bill is forecast to increase to GBP 699 (USD 1,128/EUR 863) in 2020 from GBP 454 currently, assuming constant consumption. This is still some 15% lower than this week's forecast of the UK Climate Change Committee, the BNEF study, released today, says.

A total of 40% of the increase will come from low-carbon policies, including the adoption of a carbon price floor in April next year and renewable energy incentives. Wholesale power prices will account for 28% of the rise due to increasing commodity prices and as ageing coal-fired power plants are replaced mainly by gas-fired stations. The other 32% of the expected bills rise is attributed to the costs of improving the electricity network and the multiplier effect of value added tax (VAT) and company margins.

"These electricity price increases will reflect the fact that the UK is transforming its mix of generation, pushing renewables close to 30% by 2020, largely at the expense of coal, and with a greater dependence on rising gas prices," said Mike Lawn, head of power research at BNEF.

"Given current gas price trends, our analysis suggests that low-carbon policies will be the biggest single factor driving up electricity prices through to 2020," said Fraser Johnston, power analyst at BNEF. By 2020, low-carbon policies will account for 21% of a typical household electricity bill, up from less than 10% currently, Johnston added.

(GBP 1.0 = USD 1.614/EUR 1.234)

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