Energy and climate change policies could add 20 per cent to the cost of gas and electricity for energy-intensive manufacturers by 2020, according to the government.
Radical reforms are being introduced to renew Britain’s energy infrastructure and cut carbon dioxide emissions. But business groups are deeply concerned about the consequences for the UK’s international competitiveness, with the chemical industry seen as particularly vulnerable.
Radical reforms are being introduced to renew Britain’s energy infrastructure and cut carbon dioxide emissions. But business groups are deeply concerned about the consequences for the UK’s international competitiveness, with the chemical industry seen as particularly vulnerable.
The Department of Energy and Climate Change released an official estimate on Friday of the extra durden its policies could impose..
The critical variable is the wholesale price of gas, which determines the cost of generating electricity. Under the first scenario, the government assumes no change in wholesale gas prices and calculates that its policies could raise electricity bills by up to 22 per cent for energy-intensive companies. Greater efficiency, however, should cut gas bills by 3 per cent, leading to an overall rise of 20 per cent in total energy costs.
If wholesale gas prices rise, the government believes its policies will save industry will save money by reducing the UK’s dependence on fossil fuels.
Under this scenario, gas and electricity bills would fall by 4 and 9 per cent respectively, leading to an overall decline of 6 per cent in total energy costs.
But the worst-case scenario for the government would be a fall in wholesale gas prices, perhaps because of the discovery of new supplies. Electricity bills would then be forced up by perhaps 42 per cent, leading to a rise in total energy costs of up to 39 per cent.
However, Chris Huhne, the energy secretary, believes this to be the least likely outcome, pointing to the steady rise in the trendline for wholesale gas prices.
DECC said the best way to help energy-intensive manufacturing was by reducing Britains dependance on fossil fuels. Safeguarding competitiveness entailed shifting the “economy away from a high risk, high-carbon future”.
Industry groups are less sanguine. The government’s scenarios assume that companies will make big savings from energy efficiency measures.
Roger Salomone, energy adviser to EEF, the manufacturers’ association, said the study made a “genuine effort” to assess the impact on industry, but it “doesn’t answer all of our questions”. Without seeing all the assumptions, it was impossible to judge whether the assessment was realistic.
If energy bills rose by 20 per cent, Mr Salomone said this would have a “material impact” on energy-intensive manufacturers.
Rhian Kelly, the CBI’s director of business environment, urged a “full international comparison of energy prices to ensure that UK companies are not at a disadvantage”.
29/07/11 - FinancialTimes.co.uk
No comments:
Post a Comment