CITIZEN POWER ALLIANCE

Household electricity bills will rise by as much as a quarter to pay for wind farms and other forms of renewable energy, according to a new report.

The study challenges the Government’s claims that energy bills will actually fall in the next eight years because of energy efficiency savings.

The Coalition is relying on the savings to offset the price increases caused by renewable energy subsidies. Those extra costs are added on to household bills in the form of consumer subsidies.

This week the Department of Energy and Climate Change (DECC) will publish its draft energy bill, setting out how it plans to reform the electricity market and reduce the cost to households.

DECC has insisted that energy bills will begin to fall from next year and will be reduced by seven per cent - or £94 - by 2020 because of new energy efficiency policies.

These include the Green Deal, which will provide loans to fund loft and wall insulation; the roll-out of 'smart’ meters to help control and monitor energy consumption; and the improvement in the energy efficiency of kettles and other appliances.

But a study of the Government’s own figures by the Renewable Energy Forum (REF), a specialist renewable energy consultancy, has accused DECC of deliberately misleading the public.

REF claims its analysis of the Government’s own figures shows that two-thirds of households, about 17 million in all, will be worse off - even if energy efficiency targets are met in full.

In a 54-page report published tomorrow [Monday], REF will conclude: “DECC has made unrealistic assumptions about the use of energy efficiency measures to offset the costs to households, but even on those optimistic assumptions 65 per cent of households will still be net losers.

“In fact there is every reason to suppose that the efficiency measures will not live up to these expectations and that costs have been understated.”

REF estimates that the UK’s climate change policies - which promote wind farms and other forms of renewable energy - will be responsible for 'major increases’ in the retail price of electricity and gas.

It estimates that electricity prices on domestic bills will rise by 27 per cent by 2020 and by 34 per cent on bills for medium-sized companies. Gas prices will rise by seven per cent and 11 per cent respectively.

The row over the cost of renewable energy - especially wind farms - has caused tensions in the Coalition with DECC run by first Chris Huhne and then Ed Davey, both of them Liberal Democrats.

Earlier this year, 101 backbench Tory MPs wrote to David Cameron demanding that the £400 million a year subsidies paid to the onshore wind turbine industry be “dramatically cut”. In all, REF estimates that £1.5 billion a year is paid out in subsidies for all forms of renewable energy - including on and offshore wind - and that figure will rise to £8 billion a year by 2020.

A DECC spokesman said obtaining a “diverse energy portfolio is crucial for our energy security and to shield our homes and businesses from the sort of price shocks that we’ve seen filter through into our energy bills as a result of rocketing global gas prices”.

The spokesman added: “We are going to revolutionise the energy efficiency of millions of homes and businesses across the nation through the Green Deal which will launch later this year.”