Financial Impact

Household gas bills could rise by up to 37% and electricity costs by 13% as the government lines up consumers to pay for a green revolution that would move Britain from oil dependence to a low carbon economy. A renewable energy strategy outlined by ministers yesterday signalled that energy bills could soar by hundreds of pounds, and could push over 2 million extra people into fuel poverty.

John Hutton, the industry secretary, said proceeding with business as usual was not an option in the face of climate change, and added that the price of change was "really quite modest". But he promised special measures to ensure the poorest sections of the community were not hit hardest: "We have got to provide help, if we can, to low-income families particularly those with children, to meet the rising cost of energy."

Surcharges on gas and electricity are expected to reach a peak in 2020 under the government plans, as consumers help pay for £100bn investment by the private sector in wind turbines and solar panels, in an attempt to meet EU targets of producing 15% of all UK energy from renewable sources. The first government estimates of the cost to the consumer are published at a time when British Gas customers could face price rises of a further 30-40% later this summer as a result of a steep increase in wholesale gas costs.

Energywatch, the consumer group, said that every 1% increase in power bills brought 40,000 people into fuel poverty, defined as those who spend more than 10% of their income on lighting and heating. The current number is 4.5 million.

"We are very worried about the impact of this [renewable strategy]," said Patricia Ockenden, a spokeswoman for energywatch. "Most of our work is already focused on the fuel poor and the existing cost of energy for the wider population."