The government could save each member of the population almost £550 by 2020 if it scraps expensive wind energy plans in favour of cheaper nuclear and gas-fired power plants.
A controversial report by KPMG, the accountants and adviser on government energy policy, will this week say that Britain can reach the 2020 target on reducing pollution imposed by the European Union for a third less than predicted, a potential saving of £34 billion.
To do so, says the report, entitled Thinking About the Affordable, the proportion of wind power envisaged in the current plan would need to be slashed and the energy shortfall made up by new gas-powered stations and nuclear reactors.
The report could reignite the feud between George Osborne, the chancellor, and Chris Huhne, the energy secretary, on how best to tackle Britain’s energy needs.
Last month Osborne suggested he might slow the UK’s low-carbon makeover and vowed not to “save the planet by putting our country out of business”. In response, Huhne criticised “curmudgeons and fault-finders who hold forth on the impossibility of renewables”.
Cost is central to the debate. Wind power is the most expensive form of electricity generation to build, while 5.5m households are already suffering from “fuel poverty”, which means they spend at least 10% of their net income on energy bills.
This summer saw steep price hikes imposed by the “big six” power firms, which drove the average household bill to £1,345, almost double the £740 figure of five years ago.
Under the current plans, KPMG estimates that companies will have to spend £108 billion by 2020 on a new generation of land and sea-based wind farms, solar-power producers and nuclear reactors, driving bills yet higher. The figures do not include the billions of pounds more that will be required for grid connections and to increase energy efficiency.
Mark Powell, author of the report, said: “Taking a clinical economist’s view of hitting our carbon-reduction targets for the least cost shows that we can reach our goal for a lot less.
“However, in order to do this, the most expensive forms of renewable energies – particularly offshore wind – need to be scaled back in the generation mix. Trying to meet our carbon targets with a heavy reliance on renewable energy was a laudable vision, but surely it’s time to face the facts on how the huge level of investment may translate into fuel poverty.”;
Powell said replacing fossil-fuelled power stations with gas-fired plants and more nuclear stations would cut emissions, helping Britain to reach its target of a 34% reduction in CO2 emissions over 1990 levels and to increase the level of energy from renewable sources to 15%.
The “nukes and gas” approach would, says the report, cost £74 billion, far less than the estimated £108 billion cost of the current programme to reach both targets.
Based on current building costs an 800 megawatt gas-fired power station, capable of producing round-the-clock power for 800,000 homes, will cost about £400m. By contrast, an offshore wind farm with the same capacity that will produce at most a third of the time, due to the wind’s variability, will cost six times that figure. Nuclear plants cost a similar amount but do not require the back-up plants that wind farms do.
The issue could come to a head as early as November 29, when Osborne delivers his autumn statement. He is expected to seek to allay some of the fears of manufacturers who have warned that “green taxes” and renewables subsidies might force them overseas.
However, in an indication of the potential for future cabinet ructions, the energy department took issue with the report’s findings. “By focusing exclusively on the upfront capital costs, KPMG ignores the long-term benefits to consumers of energy sources that involve no ongoing fuel costs,” a spokesman said.