David Cameron has ordered energy companies to bring down fuel bills as the cost of building new onshore wind farms and other renewables falls.
Households are currently paying record high fuel bills due to fossil fuel prices and ‘green taxes’.
Every energy company is obliged to generate a certain amount of electricity from ‘green’ sources like wind and the extra cost of this is passed onto consumers.
The so-called ‘Renewable obligation’ already adds around £20 to the average energy bill every year and this is expected to go up to more than £50 by 2020.
Mr Cameron said the ‘green taxes’ should come down.
“As costs fall so it is right that consumers should pay less in subsidies for new projects,” he said.
“We don’t just need greener energy – we need cheaper energy too.”
The cost of onshore wind is already falling and is now on a par with coal and nuclear, though it is still more expensive than gas.
There are already more than 3,500 turbines onshore in the UK and this is expected to increase as part of Government policy to more than double capacity.
Mr Cameron said energy companies must get the costs down further.
“We can get these costs down further. I really believe that more mature renewable technologies can be among our cheapest energy sources within years, not decades,” he said.
Mr Cameron’s first major speech on green issues for two years was welcomed by commentators in the energy sector.
It was seen as riposte to Tory backbenchers who have complained about the growth of wind power in the UK, while reassuring those in his party who fear that the cost of renewables is too much.
“Our commitment and investment in renewable energy has helped to make renewable energy possible,” he said.
“Now we have a different challenge. We need to make it financially sustainable.”
“The industry is far too busy counting all this money to worry about ‘financially sustainability’. They couldn’t care less; their boots are full or soon will be.”
Richard Lloyd, executive director at the consumer champion Which?, said the Government – not just energy companies – need to work to bring down bills.
“We welcome the Prime Minister discussing green policies and the need to be financially sustainable, but once again the Government seems to forget it also needs to be affordable for consumers who are the ones left picking up the bill.
“Too many of the Government’s green initiatives are ill-thought out and look set to be ineffective and costly – from the £11bn smart meter fiasco, the poorly planned Green Deal, the feed in tariff where costs have tripled and the carbon floor price that will push up fuel bills without incentivising investment.
“People tell us that soaring fuel bills are their number one financial concern, so as the country enters recession once again, we want to see policies that will encourage consumers to save energy and protect them from volatile future prices, but not at any price. The Government must offer consumers a fairer deal.”
Dr John Constable, Director of the Renewable Energy Foundation, said the total cost of renewables to the consumer is £60 per annum and it could rise to more than £300 by 2020.
He was doubtful the falling costs of green energy will be passed onto the consumer.
“Income support to renewable electricity generators last year cost the consumer £1.5 billion, over half going to wind power, and by 2020 this will be around £8 billion a year,” he said.