Plans to tackle climate change will add £277 to annual household fuel bills unless consumers give their homes a ‘green makeover’, ministers warned yesterday.

Energy and Climate Change Minister Chris Huhne admitted the massive expansion of wind farms across Britain – along with clean coal power stations – will send electricity and gas prices soaring.

But Mr Huhne claimed that the price increases would be offset by government plans to improve the energy efficiency of millions of British homes.

According to the Department for Energy and Climate Change, the shift to a green economy will increase the price of electricity by 33 per cent, and the cost of gas by 18 per cent.

The average household gas bill is £620, while the average electricity bill is £500. Under the forecast price rises, those figures would rise to £732 and £665 – an increase of £277.

Increased personal debts warning

Steven Jackson of Beatmtdebt.com is worried that already stretched consumers can not afford to pay more without increasing their levels of debt.

"Many people are currently living at full stretch in terms of their personal finances. With expectations of wage reductions and unemployment as a result of the government cuts, increases like this will quite simply leave many with no option than to borrow so that they can afford to pay their bills" he said.  

"Increased borrowing will inevitably lead to more people getting into trouble with debt and having to turn to debt management solutions " Jackson warned. 

Consumer groups warned that the proposed hike could hit families and older people unable to add insulation, double glazing and new boilers.

The prediction came as Mr Huhne unveiled the Government’s plans to tackle the looming energy crisis and slash the UK’s greenhouse gas emissions over the next ten years. Britain has pledged to cut its emissions by 34 per cent on 1990 levels by 2020.

Reduced demand for energy

In the first annual energy statement to MPs, the Liberal Democrat minister pledged to ‘keep the lights on’ with an expansion of wind farms, renewable energy, smart meters and energy efficiency.

Mr Huhne – who previously opposed nuclear power – also said the first of a new generation of nuclear power stations would be built by 2018. Some of the price hikes will pay for 10,000 new wind turbines on land and at sea.

He said: ‘The era of cheap, abundant energy is over. We must find smart ways of making energy go further, and value it for the costly resource it is, not take it for granted.’

Mr Huhne said the Government’s ‘green deal’ – in which millions of homes will get insulation, double-glazing, efficient boilers and draught excluders – would reduce demand for energy.

Under the ‘green makeover’, domestic fuel bills will be 1 per cent higher – increasing by just £13 a year – while business fuel bills will go up 26 per cent as a result of climate change policies, he said.

Mr Huhne said the cost of fossil fuels was also forecast to rise, and that householders could be better off if the UK shifted to green energy.

Opportunity to reduce fuel bills unrealistic for many

Audrey Gallacher, head of energy policy at Consumer Focus, warned that many families could miss out on green makeovers for their homes. ‘We remain sceptical that this is going to be delivered, particularly for those on a low income,’ she said.

‘The Government is taking welcome steps to ensure the UK has a secure, lower carbon, energy supply.

‘Measures to help customers, such as using smart meters to cut energy use and energy efficiency schemes to stop homes leaking heat, will benefit many.

‘However, there is no escaping the fact that steps to transform our energy system have a huge price tag and that this is going to impact hardest on the poorest consumers.’

Two years ago the Government’s Committee on Climate Change claimed tough targets on tackling climate change will cost Britain the equivalent of £500 for every household and push 1.7million people into fuel poverty.

The independent Government advisers said the shift to a ‘low carbon economy’ could cost 1 per cent of the UK’s gross domestic product – or £14billion a year – by 2020 and lead to massive hikes in electricity and gas bills.