Gas, not renewables, is driving up bills, says Climate Committee

Independent report concludes green policies contributed just £75 to £455 increase in energy bills experienced since 2004

Soaring gas prices are contributing far more to increases in household energy bills than policies designed to support renewable energy and the other elements of the green economy, according to the Committee on Climate Change (CCC).

New analysis from the independent body finds the majority of homes have seen their annual bills rise from £604 in 2004 to £1,060 last year. But almost two thirds of that increase was down to rises in the wholesale gas price, compared to just a seven per cent increase resulting from renewable energy subsidies.

The report breaks down the £455 increase in bills, concluding that rising gas prices accounted for £290, transmission and distribution costs accounted for £70, VAT added £20, and £75 was the result of policies to reduce carbon emissions.

The cost of low carbon policies equated to £30 a year to support investment in renewable energy and £45 for energy efficiency schemes, which in turn help reduce energy consumption.

The news is likely to be welcomed by many green businesses who are concerned the Treasury is pinning the blame for energy price increases on environmental policies,  after Chancellor George Osborne complained of the "burden" of environmental legislation during his Autumn statement.

Kennedy said that this was set to rise by £110 by 2020, making the typical bill £1,250, of which £100 would go to further investment in low-carbon energy generation capacity and £10 towards domestic energy efficiency schemes.

However, Kennedy said most of the increase in prices would occur in the second half of the decade and stressed that "the benefit significantly outweighs that £100 cost".

The report identifies that more efficient lighting and appliances could reduce consumption 19 per cent over the next decade, while improving homes through measures such as loft and cavity wall insulation could save another six per cent.

The CCC's analysis was welcomed by the Department of Energy and Climate Change (DECC), along with renewables trade groups, and a swathe of green campaigners.

"[The report] underlines why it is so important that we reduce our reliance on imported fossil fuels and protect our homes and businesses from international fossil fuel price shocks," a DECC spokesman said. "Investing to boost energy efficiency and develop a home-grown mix of low carbon energy sources is key if we want to make sure UK homes and businesses are no longer at the mercy of volatile international fossil fuel prices."

Dr Gordon Edge, RenewableUK's director of policy, added that the report backed up the government's conclusions in the Carbon Plan released earlier this month that doing nothing to address rising emissions was a more expensive option than investing in low carbon solutions.

"Over the last decade, rising fossil fuel prices have pushed up energy bills by more than double the amount that low-carbon investment is expected to do so in this one," he added. "And that extra £100 brings us more stable prices, a UK industry, and reduced dependence on imports, making investment in renewable energy excellent value for money."

Nick Molho, head of energy policy at WWF-UK, said the CCC had "injected a note of sanity into the fevered debate around household energy bills" and decried the "myth" that the cost of green policies and support for renewables is driving up energy bills.

"This deliberate attempt to pervert the debate and mislead consumers has also damaged confidence in an industry that can provide a major boost to UK investment and economic growth," he added.

"The reality is that renewables offer us the best chance to diversify our energy sources away from our excessive over-reliance on gas and to create a substantial renewable energy industry here in the UK."