The UK government’s plans for a tenfold increase in renewable energy have been broadly praised by green groups and the utility industry alike but are likely to result in a 20 per cent increase in energy bills.

The government’s renewable energy strategy sets out new policy proposals that will facilitate a tenfold increase in renewable energy production in the country and help it to meet its ambitious renewable energy targets. It envisions a massive expansion of offshore wind power as well as investment in wave, tidal, biomass and microgeneration technologies.

Prime minister Gordon Brown said that the plans represent the “most dramatic change in energy policy since the advent of nuclear power”. His policy proposals aim to remove existing barriers to renewable energy deployment to encourage the private sector to invest the £100 billion needed to reach the targets set out by the European Commission’s 2020 goals.

“We are opening a new chapter in Britain’s history as a nation of enterprise and innovation, moving from the old, carbon intensive economy of the industrial revolution to the new low carbon technologies of the 21st century,” said Business Secretary John Hutton. “This vast expansion of renewable energy marks an important moment in this journey and, alongside our plans for new nuclear and clean coal, will play a crucial role in tackling climate change and reducing our dependency on oil and gas.”

But new analysis from global accounting firm Ernst & Young indicates that meeting Europe’s 2020 targets will lead to a total annual cost of £5.3 billion for UK consumers in 2020, equivalent to a 20 per cent rise in the typical domestic energy bill. But consumers remain largely unaware of the personal costs of achieving emissions cuts or of the potential of energy efficiency, says E&Y.

“A proportion of everyone’s energy bill already goes towards paying for climate change mitigation, through mechanisms such as the EU Emissions Trading Scheme and the Renewables Obligation, but relatively few consumers are aware of that,” says Duncan Coneybeare, sector analyst in the utilities practice of Ernst & Young. “This contribution will rise significantly as a proportion of a households’ energy bill. That is the real impact of a low carbon agenda, but it seems customers are not yet prepared for the necessity or scale of that rise.”

But utilities and green groups insist that radical steps are needed to meet the targets, which for the UK mean renewable energy accounting for 15 per cent of energy consumption by 2020.

Jonathon Porritt, chairman of the Sustainable Development Commission said: “At a time when oil prices are soaring, it is brave but absolutely correct that the government is up-front and honest about the fact that meeting ambitious renewables targets will add to energy costs between now and 2020. But these costs will be offset if we all reduce the huge amount of energy we waste. Unless we act now we will be imposing huge costs on the poorest and most vulnerable people in the UK and around the world in terms of climate change impacts.”

“A shift of this magnitude will come at a cost and it’s important we focus on developing the most cost-effective options,” said Andrew Duff, CEO of RWE npower. “At the same time there must be a long term policy in place to protect vulnerable customers from increasing energy prices.”

Friends of the Earth said that the government’s plans are a welcome sign that renewable energy policy is “moving out of the slow lane”, but warned that policy needs to shift out up a gear if the UK is to tackle the dual challenge of climate change and high fuel prices.

Its sentiments were echoed by Greenpeace.

“If the government actually means it this time then Britain will become a better, safer and more prosperous country. We could create jobs, reduce our dependence on foreign oil and use less gas, and in the long run our power bills will come down,” said Greenpeace director John Sauven. “But it won’t happen without real government action.”

To encourage greater deployment of renewable energy the government is proposing an increase in and extension of the Renewables Obligation and the introduction of a financial incentive mechanism for renewable heat systems. It is also hoping to improve the planning system and implement incentives for new electricity grid infrastructure.

A tenfold increase in renewable energy in the UK would not only result in carbon savings of around 20 million tonnes of CO2 but also reduce gas imports by up to 16 per cent.

By 2020, 30 per cent of electricity and 14 per cent of heat energy in the UK will be derived from renewable sources. Renewables currently account for around two per cent of the UK’s energy consumption.

ScottishPower Renewables Director, Keith Anderson, said: “The government is right to reinforce its commitment to the Renewable Obligation (RO) with proposals to raise the cap to at least 30-35 per cent and extend the RO until 2035 or beyond. We look forward to this level of commitment continuing and extending to support the design and construction of an electricity grid that supports the huge expansion of renewable projects critical to meeting the 2020 targets.”

The government hopes that its proposed policy changes will increase investment in offshore wind power. In June it launched the third round of licensing for offshore wind power sites, which together with the first two rounds of licensing could provide up to 33 GW of capacity. Prime minister Gordon Brown has stated that by 2020 the country will have installed around 14 GW of offshore wind capacity.