Energy bills to rise?

Chancellor Alistair Darling announced on Wednesday that the Government is to pump £525 million of new financial support into off-shore wind energy over the next two years, but how will this be funded?

There are currently around 300,000 homes receiving electricity via wind farms in Britain, but the new funds could see this rise to 3.1 million homes. However, critics were quick to question where this funding would come from, given the current record levels of public debt and a pledge to reign in public spending.

Fuel from fossil fuels is cheaper than fuel from wind farms, so the Government currently ensures that electricity companies use renewable sources by requiring them to hold Renewables Obligation Certificates (ROC) that show that they have a met minimum renewable percentage target in terms of the energy they use.

At present, this minimum percentage for renewable energy stands at 9.1%, but in Wednesday’s Budget it was announced that this would rise gradually to 15.4% by 2015. Every time a renewable megawatt is produced, the company is issued with an ROC. If energy companies have not met these targets in terms of their own energy production, they can instead buy ROCs from renewable energy companies at a premium, which is, according to The Register, what the majority of companies do.

Critics have argued that this rise in the renewable source minimums, while clearly encouraging an increase in the use of renewable energy, will also cost the electricity companies more – a cost that will ultimately be passed on to the consumer in the form of rising electricity bills.

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