Families face punishing increases in energy bills of up to £1,000 a year to fund a switch to green energy and build new nuclear power stations.
Energy Secretary Chris Huhne yesterday outlined a new regime that will encourage firms to build thousands of wind turbines, tidal power stations and nuclear plants.
The scheme is part of a government plan to shift away from fossil fuels, particularly coal, and so dramatically cut carbon emissions to meet UK and EU targets.
There is a fierce dispute between the Government, green campaigners, academics and industry analysts over the true cost of the programme.
Ministers claim the impact on bills will be £160 a year by 2030, based on the need to spend £110billion on the complete transformation of Britain’s power network.
However, this relies on an assumption that families will cut their annual energy use in the home by 30 per cent over the same period.
Industry regulator Ofgem calculates that the work will cost more than £200billion by 2020. It has also talked of a rise of 52 per cent in bills – which equates to around £600 a year.
But analysts at the UniCredit bank believe the true cost will be even higher, with energy bills set to rise by around £1,000 a year – to £2,000.
Billions will be spent on wind farms and wave power, while there will also be massive investment to replace existing nuclear power stations, which are coming to the end of their useful life.
Mr Huhne has outlined plans to guarantee a minimum price for the electricity produced in this way.
This inflated figure would ensure the companies involved get a good profit.
Separately, there will be a carbon tax regime to raise the minimum price for power generated from gas and coal to ensure it is not cheaper than wind and nuclear power.
Money raised from this regime, estimated at £1.4billion a year by 2014, would go straight into Treasury coffers.
Billions of pounds will also have to be spent on a vast new network of cables, pylons and sub-stations to connect the wind farms and other power stations to the National Grid.
There are also plans to spend more than £11billion on installing so-called ‘smart meters’ in every home.
It is claimed people will ration energy use when they can see exactly how much they are using – as they are using it.
The official customer body Consumer Focus described the Government’s claims of an increase in annual bills of £160 a year as ‘optimistic’.
Mike O’Connor, its chief executive, said: ‘We recognise the need for reform. However, consumers can’t be expected to write a blank cheque to decarbonise electricity generation.’ The Climate Change Act requires the UK to reduce its carbon emissions by 80 per cent by 2050, compared with 1990 levels.
The Government also has to meet EU targets, under which 15 per cent of the UK’s energy demand must be supplied from renewable sources by 2020.
The rise in bills will result in a dramatic increase in ‘fuel poverty’, which is when a household spends more than 10 per cent of its income on energy bills to stay comfortably warm.
It used to affect mainly pensioners and single parents, but official figures show 4.5million households are now in fuel poverty in the UK – compared with just 2million in 2004.
Consumer Focus says the true current figure is a shocking 6.3million households – equal to almost one in four – and could soon rise to 12million.
Critics say the expensive shift to green energy is based on a false premise of man-made global warming.
Dr Benny Peiser, of the Global Warming Policy Foundation, rejected the Coalition’s figure of a £160 rise in bills, saying: ‘This is fanciful, it has just been plucked out of the air.’
Dr Peiser said there is no global shortage of gas and that Britain itself could be sitting on a gas gold mine, which would power homes for decades.
Justifying the proposals, Mr Huhne said they are all that stands between the country and power cuts. He insisted bills would rise substantially even if ministers did nothing.