Updated: Efficiency package to help firms cope with rising energy bills

Business leaders concerned that they will be asked to foot the bill for the government's new £100bn renewable energy strategy in the form of higher fuel bills could soon have access to a raft of new incentives and services designed to help them reduce their energy costs.

The government has revealed it is preparing a major consultation on energy efficiency policies to be released in the autumn, which is expected to include a range of new incentives and support services for both businesses and households.

Speaking yesterday at the launch of the government's consultation on its renewable energy strategy, Prime Minister Gordon Brown said the consultation would include proposals for "a new suppliers obligation aimed at changing the way in which energy companies operate, encouraging them not to supply ever more units of electricity and gas, but to make profits from reducing and not just increasing demand".

A spokesman for the department of Business, Enterprise and Regulatory Reform (BERR), said that as well as encouraging energy companies to help customers reduce energy use the consultation was also likely to incorporate plans for an extension of incentives on energy saving technologies, wider use of smart grid technologies, and new forms of metering designed to help firms cut energy use.

He also argued that reports today that the renewable energy strategy will lead to huge rises in energy bills were guilty of lack of "balance".

The government's consultation document admitted that the increased subsidies required to drive investment in renewable energy would result in an increase in domestic electricity bills of between 10 to 13 per cent and a rise in gas bills of 18 to 37 per cent by 2020. The projections for business customers are worst still with the report claiming electricity bills will climb by between 11 and 15 per cent and gas bills will rise by between 24 and 49 per cent.

The strategy prompted criticism from employers' association the CBI, which argued that such a huge increase in renewable energy capacity did not represent a cost effective means of cutting carbon emissions.

However, a spokesman for BERR said that many of the media reports on the cost of the new strategy had failed to note that the projected increases in fuel bills represented a "worst case scenario".

"The figures are based on a scenario where oil costs $70 a barrel in 2020," he said. "If oil prices remain high the impact of the renewables strategy on energy prices could be half that projected."

He added that the bulk of any increase in prices was also unlikely to take effect until 2015 and that in the longer term the strategy should result in lower energy bills. "When you look post 2020 when we will have a higher price on carbon then the increased use of renewables will mean that prices will be lower than they would otherwise have been," he explained.

Dr Mark Williamson, director of innovations at the Carbon Trust, said that the increases in prices were likely to prove "tolerable" and would help stimulate further investment in energy efficiency measures. "In fairness to the government, it makes the point in the report that energy efficiency is still the vital first step to meeting renewables targets," he said. "If you can reduce the energy you use it makes it far easier for the EU's renewables targets to be met. "