Increased reliance on gas could lead to UK power bill spikes, Ofgem chief warns

by James Martin II on February 20, 2013

Electricity price inflation in the UK

The outgoing chief of the UK’s electricity and gas market regulator, Ofgem, has issued a warning about impending rises in the price of electricity and heating across the UK as the country’s reliance on imported gas as a fuel for power generation grows. The impending closure of nearly 10% of the UK’s electricity generation capacity in April–mostly in the form of ageing coal-fired plants–threatens leave the UK vulnerable to gas price volatility.

The Ofgem Chief, Alistair Buchanan, blamed the global financial crisis (GFC) as the primary reason for the UK’s increasing dependence on gas. Before the GFC, the country had the resources to fund ‘visionary’ approaches to energy transformation, but since then has had to scale back its plans and investment in new infrastructure. Although older power stations are closing, no new ones have yet been built to replace them, and in the next few years the UK’s ability to produce power will actually be diminished. At the same time, gas is becoming a more and more sought-after commodity globally. This means that in several years’ time the world will see an expansion of the global market for gas, which in turn will likely lead to increased competition and rising prices.

How UK energy mix will change

Mr Buchanan also emphasised the importance of addressing the issue of ‘leaky’–i.e. energy inefficient–homes to make sure that the power being generated isn’t going to waste. One of the central pillars in the current government’s approach to energy is its Green Deal program, which gives homes access to financing for energy efficiency measures and other ‘clean’ technologies. The primary goal of the Green Deal is to squeeze more ‘bang’ out of every pound spent on energy by making energy use more efficient and generation less carbon-intensive.

Solar panels are seen as another key way that homes can safeguard themselves against the rising price of energy, but not all households can afford to have a system installed without some kind of financing. However, the relatively short payback periods and high return on investment that solar PV systems offer make them attractive options for UK households looking to save money on power bills.

Thinking about going solar? Let Solar Selections help you find the best deals on solar panels in your are of the UK. Request a Solar Quote Comparison by filling out the form to the right of this page, or call us on 020 7205 2267 today.

While ballooning electricity prices are sometimes blamed on government support for renewable energy, such means of power generation are not ordinarily subject to the same price volatility that fossil fuel generation is. And despite claims that the price of gas may be one of the other primary factors behind the rising retail price of electricity to date, a chart from Ofgem makes clear where the bulk of the increases are coming from; while the wholesale cost of generating power year-on-year for the past 5 years has fallen or remained stable, ‘other costs’ (including VAT) have been on the increase.

According to Labour’s shadow energy and climate change secretary Caroline Flint, there is room for improvement in terms of ensuring that energy remains affordable for everyone–especially the most vulnerable of the population. The UK needs a power market that ”delivers fair prices and works in the public interest”. She also said that her party has plans to develop ”a tough new energy regulator with the power to force energy companies to pass on savings to consumers”, putting an end to electricity price profiteering.

Typical Customer Electricity bill BBC


Source: BBC

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