Auditel Consultant:
Jack Pokoj

Energy Prices Set to Soar!

09 Oct 2009 | Filed under: Energy

Domestic UK energy bills are estimated to rise by between 14% and 60% by 2016 according to energy regulator Ofgem. The review also said that up to £200bn of investment was needed to secure supplies and to meet carbon targets. Volatile gas markets and power stations nearing the end of their use were the chief concerns, the regulator said.

The report was the result of Project Discovery, a scheme that Ofgem started in March in which it outlines four possible scenarios for energy use and security in the next 10 to 15 years.

It pointed out the need for investment came at a time of volatile world energy prices and Britain’s increasing dependence on gas imports. This exposure meant that supply disruptions across the world could affect prices. The scenario in which prices could spike by 60% was that of a strong resurgence in global economies, along with missed renewable and carbon targets, and no nuclear facility built before 2020. The report said the cheapest scenario – with a hike in bills of 14% by 2020 – factored in a slow recovery from the recession, coupled with global green stimulus packages. In this option, high carbon prices and government policies would support investment in renewables, nuclear and carbon capture and storage.

But significant changes are needed in the way energy is generated and consumed, the report added. “These are big challenges. Consumers are already enduring high energy prices,” said Ofgem chief executive Alistair Buchanan. “This is why we are consulting with consumer and environmental groups, the academic community and industry to ensure any policy proposals we make are grounded on the best evidence available. Early action can avoid hasty and expensive measures later.”

Mr Buchanan said that the good news in the report was that emissions would fall by up to 43% from 2005 levels, describing the climate change targets as “very, very tight”.

The report came as the UK was facing the effects of the financial crisis, an acceptance that it was “no longer an energy island”, and that it would see a revolution in the approach of power generation, he added.