The agreement, which paves the way for next week’s long awaited energy bill, will be unveiled by energy minister Ed Davey today.
Under the agreement the green levy placed on consumer bills will increase in a bid to boost investment into low carbon energy plants. People currently pay two per cent, or £20 annually, to subsidise investment in green technology but this will rise to seven per cent, or £95 a year under the plans. The government hopes to raise £7.6bn from the levy, which currently stands at £2.35bn, to help build more green power stations by 2020.
The coalition hopes the increased levy will entice energy companies to build more low carbon energy plants in the UK. The levy subsidises their investment, reducing their cost of capital. The government believes it needs £110bn of investment by 2020 and hopes up to 250,000 jobs will be created by the initiative.
Taking all government energy policies into consideration until 2030, households would see bills rise by £178 a year. “Once we get this bill, the cost of capital is going to be really competitive,” a government source told City A.M.