10th July 2014
Wholesale electricity costs could double over the next two decades while gas prices could rise by 43% according to forecasts in a new report from National Grid.
The research document entitled, ‘Exploring the future of UK energy’, which runs four possible futures for the energy sector, has concluded in a “high-case” example that the price-tag for wholesale electricity could rocket to more than £100 per megawatt hour by 2035.
The report from the power network also anticipates that the wholesale cost of gas could go from 70p per therm – a unit of heat energy – to some 100p, under another high case scenario.
National Grid, which is responsible for the UK’s wiring and piping, has pointed the finger at the rising number of coal-fired power stations being shut down as well as the cost of subsidising wind farms as the primary reasons for the estimated spike in prices.
The report states: “Electricity prices for the high case and base case scenarios are assumed to increase over the next few years due to decreasing margins as coal-fired plants retire due to the Large Combustion Plants Directive (LCPD) legislation, and some gas-fired plants are mothballed.
“All prices increase post-2020 as the costs of low carbon generation increasingly factor into the power price.”
Notably consumers have been bearing the brunt of higher energy costs for sometime as wholesale oil prices have almost doubled between 2005 and 2013; wholesale gas prices have increased by a third and wholesale electricity prices, while volatile in 2007/08, have increased by 20% since 2009.
Tom Lyon, an energy expert at comparison site uSwitch energy expert, commenting on the report’s findings said: “We could see average energy bills soaring from £1,265 today to around £2,125 by 2035 under National Grid’s ‘high case’ scenario. With hard-pressed consumers already feeling the strain of high energy costs, today’s report should be a wake-up call for the Government to put affordability at the heart of future energy policy.”