Commercial and industrial energy bills could rise by a quarter by 2030

10th December 2014

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Olivia Finch

Low carbon policies could push energy bills up by 25% for commercial and industrial users by 2030 unless they improve energy efficiency, according to the body advising the government on climate change.

The Committee on Climate Change (CCC) today published its third report on the impact of the UK’s carbon budgets on energy bills.

Currently, energy bills comprise around 0.5 per cent of total costs for commercial businesses in sectors such as retail and property, and for public sector organisations such as hospitals and schools.

Commercial sector energy bills increased by 135-155 per cent between 2004 to 2013, primarily due to increases in the wholesale price of gas, the CCC said. It cites between 15 and 35 per cent of the increase as being due to low-carbon policies, with the share varying depending on the share of electricity in total energy spend and whether or not the firm faces extra costs from having to meet requirements under the Carbon Reduction Commitment (CRC).

Bills could increase in real terms by 10-15 per cent by 2020 due to the costs of low-carbon policies; and by 30-45 per cent by 2030, the CCC predicts. However, firms could offset bill rises by taking action on energy efficiency, which could save them around 20 per cent by 2020, it says.

The cost of goods and services provided by the commercial companies could rise as a result of increased energy costs by around an additional penny on every £10, it predicts.

Energy costs for industrial users currently make up around 2.3 per cent of total costs, the CCC found. Its report states that bills rose by 140-145 per cent between 2004 and 2013, mostly due to rises in wholesale gas prices. Low carbon policies were responsible for around 20-33 per cent of the rise, depending on how much of the total energy use came from electricity.

The CCC estimates energy bill rises for industrial users of 10-15 per cent by 2020 due to low-carbon policy costs, and 20-30 per cent to 2030. This is the equivalent to a 0.3 per cent rise in total sector costs to 2020, and 0.6 per cent to 2030, it says.

Industrial businesses have the potential to save around five per cent on bills to 2020 and nine per cent to 2030 through energy efficiency. These savings have the potential to cancel out the increase in energy costs as a proportion of total sector costs to 2020, the CCC predicts.

The CCC concedes that increased energy bills could encourage industrial businesses to move abroad, but says there has been no significant industry location to date.

Gareth Stace, head of climate and environment at manufacturing body EEF said that the report revealed “serious competitive pressures” on heavy industry from climate change policy. Measures announced by the government to protect heavy industry could compensate for around 80 per cent of rising bills, but do not stretch beyond 2019/20, he said.

“It is crucial that in future industrial considerations are placed at the centre of energy policy formation, rather than something to simply tag on at the end,” Stace said.

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