Clarity sought on future power policy so sector 'can decarbonise at lowest cost'

New low-carbon power sources are the most cost-effective way to meet electricity needs in the 2020s and tackle climate change, government advisers have said.

Investment is needed in new power generation in the 2020s to replace closing coal and nuclear plants, while stripping carbon emissions from the energy sector is important for meeting the UK's legally-binding climate targets, the Committee on Climate Change said.

Backing low-carbon power is set to add around £105 on the average consumer electricity bill in 2020 and £120 by 2030, before costs fall, a report from the committee said.

While the cost of low-carbon technology such as nuclear and renewables will be slightly higher than investing in gas, it will deliver more greenhouse gas reductions and cut down on the "social" costs that fossil fuel pollution imposes on the UK and world, it said.

The report on future power sector scenarios comes as the government faces criticism for rowing back on support for lower cost renewables such as solar farms and onshore wind and failing to give investors certainty on the direction of future policies.

The government must urgently clarify the direction of future policy to ensure emissions from electricity are cut at the lowest cost to households and businesses, the committee urged.

Lord Deben, committee chairman, said: "The 2020s are crucial in setting the direction for UK power generation, and to ensure the UK can meet its 2050 climate change commitments cost-effectively.

"The key tools are already in place to deliver the investment in low-carbon generation that is required.

"The government must now urgently clarify the direction of future policy to ensure the power sector can decarbonise at lowest cost to businesses and households."

The report revealed that investments already committed to up to 2020 were set to roughly halve the carbon pollution of electricity generation from current levels of around 450 grammes of carbon dioxide per kilowatt hour (gCO2/kWh) to 200-250gCO2/kWh.

Some renewables, including solar farms and onshore wind, were already cost-competitive with gas if the fossil fuel had to pay a price for its pollution.

Less mature forms of low-carbon power generation, including offshore wind and technology to capture and store underground carbon emissions from fossil fuel plants, would need continued support in the 2020s if they were to reach maturity.

But the report said the options represented "good value investments for a society committed to climate targets", with the UK committed to legally-binding targets to cut emissions by 80% by 2050 to tackle climate change.

Consumer bills were expected to be £20 higher in 2025 and £35 in 2030 with a focus on low-carbon rather than gas power, once the impact renewables have in pulling down wholesale power prices by generating cheaper electricity was taken into account.

But the clean technologies would be saving households £25 in 2030 and £50 by 2035 in terms of the costs of the problems caused by pollution from fossil fuel generation.

Investing in low-carbon also reduced the risk of high increases in bills if gas prices or the price paid for carbon pollution rose sharply over the next decade, the report said.

Friends of the Earth senior energy campaigner Simon Bullock said: "The Government's own advisers say it will be cheaper to use low-carbon electricity rather than gas to power our economy in the 2020s.

"Ministers should be championing the UK renewable sector, instead of strangling the life out of solar and on-shore wind, threatening tens of thousands of jobs and pushing up bills in the future.

"Energy bill payers and our climate will pay a hefty price for the Government's costly and short sighted obsession with gas, oil and fracking."

A spokeswoman for the Department of Energy and Climate Change said the Government's priority is moving towards a low-carbon economy while ensuring consumers and businesses had secure, affordable energy for this and future generations.

"We are well on our way to meeting our carbon reduction targets, and we are now carefully considering the right framework for reducing emissions in the 2020s," she added.