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Fear of 'huge' energy bill rises Fear of steep energy bill rises
(about 3 hours later)
Domestic energy bills in the UK could rise by 60% by 2016-17, the energy regulator has warned. Domestic UK energy bills could rise by 60% by 2016 in a worst-case scenario identified by the energy regulator.
However, this would be the "spike" in bills, with prices estimated to rise between 14% and 25% above inflation by 2020, the Ofgem report explained. However, most other estimates outlined in the Ofgem report would see prices rise between 14% and 25% above inflation by 2020.
The review also said that up to £200bn of investment was needed to secure supplies and to meet carbon targets.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.Volatile gas markets and power stations nearing the end of their use were the chief concerns, the regulator said.
PossibilitiesPossibilities
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. 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.
Early action can avoid hasty and expensive measures later Alistair Buchanan, Ofgem It pointed out the need for investment at a time of volatile world energy prices and Britain's increasing dependence on gas imports.
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.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. The report said the cheapest scenario - with an increase 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. But significant changes were needed in the way energy was generated and consumed, the report added.
"These are big challenges. Consumers are already enduring high energy prices," said Ofgem chief executive Alistair Buchanan."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.""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."
The report said that recent events such as the Russia-Ukraine gas crisis had raised concerns about the security and price of gas supplies at a time when many European countries were becoming increasingly dependent on imports. The report said that recent events such as the Russia-Ukraine gas crisis had raised concerns about the security and price of gas supplies, given that many European countries were becoming increasingly dependent on imports.
It said that the retirement of older nuclear plants and closure of coal and oil plants in the UK by the end of 2015 could "pose a threat to security of supply".It said that the retirement of older nuclear plants and closure of coal and oil plants in the UK by the end of 2015 could "pose a threat to security of supply".
Double the recent level of investment was needed, the report suggested.Double the recent level of investment was needed, the report suggested.
EmissionsEmissions
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".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. The costs of lighting is set to rise, the energy regulator says
He said there could never be a guarantee that the lights would stay on, but by looking ahead, the industry could be prepared for the changes needed and consumers would not pay for these changes being made too late. 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.
The report is now going to consultation, with responses required by 20 November. The report said that gas and electricity supplies this winter were likely to be adequate, with a substantial reserve margin in electricity.
Mr Buchanan said there could never be a guarantee that the lights would stay on, but by looking ahead, the industry could be prepared for the changes needed and consumers would not pay for these changes being made too late.
The four scenarios for the future of energy, outlined in the Ofgem report, were:
  • Green transition: Rapid economic recovery and significant expansion in green measures lower gas demand, but increase electricity demand for electric vehicles and heat pumps. Domestic energy bills rise by 23% by 2020.
  • Green stimulus: During a slow economic recovery, governments support stimulus packages targeting environmental goals. Consumers energy bills rise 14% by 2020.
  • Dash for energy: Global economies bounce back, but there are concerns over security. Environmental targets are missed and no new nuclear plant is operational before 2020. Competition between countries for energy resources results in tight gas supplies and high fuel prices. Domestic energy bills rise by 60% by 2016 before falling back.
  • Slow growth: There is low investment in gas and electricity infrastructure during the recession. Low gas and electricity prices, coupled with low carbon prices, reduce incentives to build nuclear and renewable power plant. Dependence on imported gas eventually increases consumers' bills by 22% by 2020.
David Porter, chief executive of the Association of Electricity Producers, said that the Ofgem report showed that the government needed to ensure the UK was an attractive prospect for investors. The billions of pounds needed for investment in energy would come from the global markets.
He said it remained to be seen how much extra people would pay on their bills.
The Ofgem report is now going to consultation, with responses required by 20 November.
What is your reaction to these forecasts? How would the predicted 60% rise affect you? Will you struggle, or are you already struggling, to afford your energy bills?What is your reaction to these forecasts? How would the predicted 60% rise affect you? Will you struggle, or are you already struggling, to afford your energy bills?
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