UPDATE 2-E.ON UK chief demands energy rethink, price hikes

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By Pete Harrison

LONDON Jan 22 (Reuters) - Household energy bills must rise and energy companies must revolutionise the way they do business if the world is to combat climate change, the chief executive of power generator E.ON UK EONG.DE said on Tuesday.

Paul Golby also said the group was interested in participating in "more than one" new nuclear power station in Britain, while wind power would be the main focus of a 1 billion pound ($2 billion) investment programme in low-carbon energy over the next five years.

"The time of a cheap energy world is over," he told Reuters. "We have to start treating energy differently. Quite frankly, we waste an inordinate amount. We need to get to where wasting energy is seen almost as the crime it is."

But he said companies would have to do more than build low-CO2 power plants and pass on the cost to consumers. Britain must decentralise its energy networks, and energy firms must work more with property companies to provide electricity at a local level.

Environmentalists say the current model of using a centralised electricity grid is highly wasteful.

"Our business model is based on selling kilowatt hours of electricity or therms of gas," Golby said. "We need to find a different model."

"If I could spend 2 billion pounds on making people's homes more energy efficient and still make a decent return, rather than spending 2 billion pounds on a nuclear power station, why wouldn't I?"

CLEAN COAL

He declined to comment on gas and electricity pricing in the near term, after rivals British Gas (CNA.L), EDF (EDF.PA) and the UK arm of Germany's RWE (RWEG.DE) put up prices in recent weeks.

But he said: "Clearly we are looking at pricing. Like everyone, we're affected by rising commodity prices. When we come to a conclusion, we'll tell people."

E.ON UK is currently building one of Europe's largest offshore windfarms, Robin Rigg, near the England-Scotland border and is part of a consortium looking to build the London Array windfarm in London's Thames estuary.

It is also investing heavily in producing electricity by burning biomass, in localised heat and power schemes and in wave and tidal power.

Controversially, coal remains an important part of E.ON UK's strategy, although it is focusing on the cleanest coal projects.

It is hoping to get government support to develop new technology to capture CO2 emissions from its Kingsnorth coal-fired plant in the southeast.

Supporters of clean coal projects hope that once perfected, the technology can be exported to India and China to help curb pollution from their rapidly multiplying coal stations.

"Unless the world can solve the problems of clean coal, we're not going to solve climate change," said Golby.

Despite predicting long-term rises in the price of electricity and calling for better energy conservation, he also warned of rising demand as electric cars become more popular in the future.

"As a back-of-an-envelope calculation, energy demand might go up 10 to 15 percent to move from traditional vehicles to plug-in electric vehicles," he said. "When do we have to start planning for that? The answer is: Now." (Reporting by Pete Harrison, editing by Will Waterman, Paul Bolding)