Calls for the Government to ditch green policies in order to bring down the price of energy to consumers have been branded “short-sighted and foolish” by Business Secretary Vince Cable.
Mr Cable confirmed that arguments over subsidies for renewable energy were raging within the coalition, with Liberal Democrat ministers fighting pressure from Conservative colleagues to shift focus away from carbon reduction commitments.
His comments came as the chief executive of energy company SSE, which has raised its prices by up to 10%, called for a debate on the “green agenda” which he claims will lead to more bill hikes in the future.
Alistair Phillips-Davies said SSE’s price hike, which will push a typical dual-fuel customer bill up by £106 to £1,380 a year, would be “helpful” if it focused the nation on its spending priorities.
SSE believes bills would fall by £110 per household overnight if the Government covered green energy subsidies and the cost of other schemes, such as free loft insulation, through the tax system.
Mr Phillips-Davies told the Daily Telegraph: “A price rise is never a good thing to do, but if it focuses everyone on to a debate about what we as a nation should be spending money on, then in one way it will be helpful.
“We need to think about what people really want to pay for; maybe it’s time to retreat from decarbonisation and focus more on the cost of living. I think we have to have a debate about it.
“Do we want to be replacing one bit of (energy) generation that we can keep going for a bit longer with a new bit of generation that’s going to cost more?”
He added: “I doubt the public like price increases of this magnitude, but if we carry on firmly behind the green agenda we will continue to have price increases like this.”
But Mr Cable insisted that the consumer will gain in the long run from investment in renewable energy sources like wind, and denied that green policies were a major factor in pushing up prices.
“The rise in energy prices is due to a whole variety of things, by far the most important of which is what’s happening in world energy markets,” the Business Secretary told BBC Radio 4’s Today programme.
“We’ve had over a period of years very rapidly rising demand in Asia, particularly in China, we’ve had restrictions on supply from countries like Iran. A combination of these things has pushed up oil and gas prices and that is what has fed through to consumers.”
“What we shouldn’t be doing is scrapping our environmental policies. That would be very short-sighted and foolish.
“If you are taking a long-term view about shifting the British economy on to a less polluting, less carbon-based system, we have to provide those incentives. What will happen in the long term is that the costs of renewable energy will fall. We’ve already seen this with solar power, it’s beginning to happen with offshore wind.
“We are investing very heavily in it, Britain is the largest offshore wind sector in the world and the more we do, the more costs will fall, and the consumer will benefit from it.”
Mr Cable acknowledged that Liberal Democrat ministers had to fight for carbon reduction policies within the coalition.
“It is a continuing argument in the coalition, because Liberal Democrats have been arguing that we need to maintain a long-term priority towards a less carbon-based and polluting economy, and we have to make the decisions associated with that,” he said.
SSE’s decision to hike bills is expected to trigger a series of increases by the other Big Six energy suppliers - Centrica, EDF, Scottish Power, E.ON and npower.
The company said wholesale energy prices were up 4%, paying to use newly upgraded networks by 10% and Government-imposed levies up 13%.
Labour leader Ed Miliband insisted the suppliers were “ripping people off” and said the increases - which will take effect on November 15 and affect an estimated 7.3 million customers - reinforced the need for a 20-month freeze on energy prices.
Martin Lewis, of the Moneysavingexpert website, said the price hike would mean many people this winter will have to choose “between heating and eating”.
SSE’s price hike will see an average increase of 8.2%, three times the rate of inflation, affecting 4.4 million household electricity customers and 2.9 million gas users. It has around 9.5 million customer accounts, many of which are on fixed-price tariffs.
Regional variations mean rises will range from 7% in northern England and parts of Scotland to 9.7% in the South East. They will be higher for those who use a high proportion of cheaper energy at off-peak times.
SSE, which trades as Southern Electric, Swalec and Scottish Hydro, said the rise would come into effect from November 15, and it pledged not to lift them again for a year.
It last increased tariffs a year ago, by 9%, just before a bitterly cold spell.