Huhne: Business energy bills to rise by a fifth by 2020

The mounting pressure on businesses to enhance their energy efficiency was underlined today, after Energy and Climate Change Secretary Chris Huhne warned energy bills for corporate customers will rise by up to 20 per cent by the end of the decade.

Delivering his annual energy statement in the House of Commons, Huhne said that while the government's various energy policies will result in a net reduction in average domestic energy bills compared to a "do nothing" scenario, businesses that are medium-sized energy consumers will see bills rise by 19 per cent.

He added that large energy users who are more exposed to fossil fuel price volatility will see energy bills rise by anywhere between two and 20 per cent.

Huhne said that he was "mindful" of the impact of rising energy prices on businesses and stressed that the government was planning to simplify the Carbon Reduction Commitment scheme and the regime of Climate Change Agreements to help promote corporate energy efficiency.

He also reiterated that DECC is working with the Department for Business and the Treasury "to announce measures before the end of the year to support those energy-intensive industries whose competitiveness is most at risk" from rising energy prices.

However, he acknowledged that policies designed to drive investment in low carbon infrastructure would result in higher energy prices and while domestic customers would see those increases offset by new energy efficiency schemes "lower levels of energy efficiency savings mean our policies will typically have a larger impact on energy bills for businesses".

In contrast, new modelling from DECC predicts that energy efficiency and green energy policies such as the Green Deal and the Renewable Heat Incentive will mean that in 2020 average household bills will be seven per cent, or £94, lower than if the government were not pursuing its current policies.

The impact assessment also suggests net savings for domestic customers will start to kick in from around 2013 and over the remaining lifetime of this Parliament average household bills will be lower than they otherwise would as a result of energy and climate policies.

"We anticipate that rising world gas prices will push up bills," Huhne said. "But our policies will moderate this rise... Britain's homes will be cheaper to heat and to light than if we did nothing - in this Parliament, and in the longer term."

A spokeswoman from the UK Green Building Council said the new figures further strenghtened the business case for investment in energy efficiency measures.

"Increased efficiency would be the sensible approach to these predictions," she said. "As it says in the consultation document, businesses are wasting vast amounts energy a year. There are a range of measures for running buildings more efficiently."

However, Rhian Kelly, CBI Director for Business Environment, said the government needed to deliver a more stable green policy environment to drive investment in energy efficiency and emission reduction measures.

"We need the right policies in place to help reduce energy bills and attract essential investment for more secure, affordable and low-carbon energy infrastructur," she said in a statement. "Following the Government's recent unexpected changes to the solar feed-in tariff, it still has a long way to go to build business confidence."

In a wide ranging statement, Huhne also reiterated his commitment to providing £1bn of funding to a new carbon capture and storage project, despite the "disappointment" of the proposed project at Longannet falling through, and stressed that the government's low carbon strategy will deliver numerous economic benefits.

"More than 51,000 companies in Britain provide low-carbon and environmental goods and services," he said. "Exports are now £11.3bn per year, up 3.9 per cent. Last year, nearly 4,500 new jobs were created in the sector, which grew by 4.3 per cent."

However, the statement brought an angry response from Labour's shadow energy and climate change secretary Caroline Flint, who accused Huhne of deliberately scheduling the annual statement for an opposition day in parliament in order to eat into the time available for Labour's debate on the government's proposed cuts to feed-in tariff incentives.