Research to be released today by the Australian Industry Group finds that a "well-designed" carbon price would ease some of the pressure on energy prices, which are forecast to rise over the next decade.

However, a carbon price of $26 a tonne is still estimated to increase electricity costs for households by 17.6 per cent in 2012-13, taking an annual bill for a Sydney home to $2000 from $1700.

But the report warns that a failure to implement a well-designed climate change policy could entrench higher power prices.

"Without decisions in this area over the next couple of years, damaging uncertainty is likely to lead to sub-optimal investments that leave both prices and emissions higher than they need be – with serious and uncompensated impacts on trade-exposed firms," the report says.

The research attacks the government’s renewable energy scheme – particularly subsidies for household solar photovoltaics panels – as not offering value for money in terms of either emissions abatement or support for innovation.

AIGroup chief executive Heather Ridout said the government’s renewable schemes were splurging on the most expensive renewables instead of the cheapest and warned that the nation could "get stuck with the equivalent of a Rolls when a hatchback would do". The report – based on a survey of more than 150 companies – warns that consumers would be forced to pay $1.12bn in 2011 just to cover the cost of household-level renewable systems, particularly rooftop solar photovoltaic panels.

The government’s scheme for small-scale generators such as household solar panels was "not offering value for money in terms either of emissions abatement or support for innovation", the report warns. If the same funds were invested in big wind farms, four times as much renewable energy could be produced each year. Investing the money in large-scale solar power plants would produce twice as much energy, the report finds.

On top of this, the future costs of the government’s scheme to encourage commercial-scale renewables would be "substantially higher" than forecast if a price was not eventually put on carbon.

The government last December moved to wind back subsidies to households installing solar schemes as it sought to lower pressure on electricity prices. The move followed a decision early last year to reform how renewable energy certificates were issued to deal with a glut caused by a flood of solar panels installation.

Read more at –