Reforms to the electricity market will increase energy bills and could force businesses abroad.
The Queen’s Speech yesterday announced subsidies to help energy suppliers pay for green energy but these could force up electricity bills by as much as £200 a year.
The reform of the electricity market is designed to increase investment in low carbon energy generation and in doing so ensure the country’s energy security by bridging the energy gap.
Utility Exchange has reported in the past that there are concerns that unless there is a big investment in energy generation there may be an energy shortage as old coal fired power stations and old nuclear power plants are shut down. However, it will cost over £110 billion over the next ten years to ensure electricity generation continues and the lights don’t go out.
The Queen’s Speech introduced the Energy Bill which will reform the electricity market. It will bring in long-term contracts that pay new low carbon energy generators a steady rate of return. The reforms are designed to help with the high cost of building new nuclear power plants and offshore wind farms.
It has been reported that improvements to the energy market will increase energy bills by as much as £200 a year over the next ten years but the Government claims the reforms will increase bills by only £160 a year.
The Energy Bill, says the Government, will make electricity “secure, affordable and low-carbon” but The Daily Telegraph reports that it will bring in a number of subsidies to help pay for green electricity.
Energy companies will receive “capacity payments” to keep their power stations running as back up for wind energy. They will also receive “contracts for difference” which means the price of electricity will be artificially raised to make it worthwhile for energy companies to build nuclear power stations.
Energy suppliers will also be banned from building polluting coal fired power stations through another measure, the “emissions performance standard”.
While domestic energy bills are set to rise the measures will also hit businesses. Many are concerned that rising business electricity prices could force them to move their business abroad and make the recession worse.
The chairman of the Federation of Small Businesses, John Walker, said “Whilst we accept there is a need to stimulate investment in a new a generation of nuclear power stations and renewable energy infrastructure, small businesses have been subject to a remorseless increase in energy costs”.
He added, “It is essential that the reform of the electricity markets is accompanied by strong safeguards for consumers and measures to increase competition and break the dominance of the big six energy companies”.