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Last Updated: Friday, 11 February, 2005, 13:18 GMT
Green energy to 'cost consumers'
Wind passes over blades of a wind turbine and rotates a hub to create wind power
Consumers face a 5% rise in electricity bills by the end of the decade to help meet government targets on renewable energy, an official report says.

The National Audit Office (NAO) report says that renewable energy is a relatively expensive way for Britain to cut emissions of greenhouse gases.

The government hopes to generate 10% of the country's energy by renewable sources within five years.

The NAO says this target is achievable but at a cost of more than 1bn a year.

The Kyoto Protocol on global warming comes into force on 16 February.

It is backed by 141 nations - though not the US, the world's top polluter - and commits industrial nations to slash emissions of greenhouse gases like carbon dioxide to 5.2% below 1990 levels by 2012.

'On track'

The NAO report found that the UK government was on track to hit its goal of 10% of electricity from renewable sources by 2010.

But BBC environment correspondent Richard Black said its progress on renewable energy was "lagging" and some previous reports had suggested the government would not meet its target.

Renewable energy may be more expensive but its development is essential
Department of Trade and Industry

The NAO report's author, Nick Sloan, acknowledged these concerns, telling BBC Radio 4 the many plans needed to be co-ordinated "into a critical path".

During the 2003/4 financial year, the amount of electricity generated from inexhaustible natural resources was 2.4%, just over half the target of 4.3%.

The government hopes to double the amount of electricity from renewables to 20% of the UK's needs by 2020, cutting carbon dioxide emissions by between 20 million and 27 million tonnes.

The policy's centrepiece is a commitment to stimulate green energy by making sure those who produce it receive more than the market rate for electricity - known as the Renewables Obligation.

In addition, the government is providing capital grants to offshore windfarms, and to power stations that generate electricity from biomass and energy crops.

'Profit matters'

Altogether it intends to spend 5.5bn by 2010, or 3m a day, on creating enough generating capacity to supply seven cities the size of Liverpool.

Flooded homes in Carlisle, Cumbria, in January 2005
Climate change is bringing problems such as more frequent floods

To achieve this, the government must pay close attention to profit margins in renewable energy and "make sure investors are willing to put their money in", said Robin Smale of the Oxera economic consultancy. It has advised the NAO on implementation costs.

He said profit margins varied widely, from a healthy 20% in onshore wind farms in Scotland, to 12% for offshore windfarms - a level investors might consider "quite marginal" - and below for technologies like energy crops.

The Renewable Power Association has said the government is not doing enough to promote investment, the BBC's Richard Black reported.

More efficiency?

The NAO report also claimed there are cheaper ways to reduce production of greenhouse gases, such as promoting energy efficiency, but stops short of recommending a wholesale policy change.

The government argues a range of measures including renewables will be needed.

Carbon dioxide levels have not fallen since Labour came to power
Neil Crumpton
Friends of the Earth

Friends of the Earth's climate campaigner Neil Crumpton said the group was "encouraged" the UK appeared on course to hit its target, but that the government was still not doing enough to combat climate change.

"Carbon dioxide levels have not fallen since Labour came to power, and unless it takes tough and urgent action on transport, coal-fired power stations and energy efficiency it will not meet its promise of cutting emissions by 20% by 2010."

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