Energy prices set to remain high to end of decade

Energy bills will remain significantly above average up to 2030 and beyond, according to new research from Cornwall Insight.

Researchers from the management consultancy looked at Great Britain’s power market out to 2030 and predicted that energy prices will remain in excess of £100/MWh annually. This is significantly above the five year pre-2021 historic average of £50/MWh in winter and the even-lower prices in pre-2021 summer.

Cornwall Insight’s Benchmark Power Curve (BPC) for the British Electricity Market, which covers England, Scotland, and Wales, shows that while prices will drop from the current levels, they will remain high. Closures of nuclear power stations, delays to Hinkley C, and increasing high-cost peaking capacity could push prices to £150/MWh by the winter of 2025.

Renewable generation capacity will rapidly increase to meet targets and will help meet rising demand; however, marginal gas-fired generation sets power prices.

Tom Edwards, senior modeller at Cornwall Insight said: “While we are used to seeing headlines depicting energy prices at an all-time high; unfortunately, while prices will reduce, our modelling shows that pre-2021 prices are not making a comeback this decade and likely beyond.

“Rising EU demand for non-Russian gas has pushed up gas prices across the world, and these higher prices have increased production costs for power, with gas set to remain the marginal fuel source for producing power throughout the remainder of the 2020s. With all GB coal capacity due to close by April 2024 and many nuclear power stations coming to the end of their lives, high power prices will continue to feed through into consumer bills.

“The next decade and beyond will see significant changes to the energy generation technology mix with renewables becoming more and more important. We must make sure that not only do we plan for long-term generation, but we work to design a wholesale market which supports investment in new low carbon capacity at the lowest possible cost to consumers. We welcome BEIS announcement of the Review of the Energy Market Arrangements (REMA) as part of the energy security strategy.”

Earlier this month, Cornwall Insight forecasted that household energy costs could remain well above £2,000 until at least 2024.