Power bills are unlikely to fall back to pre-Ukraine War levels until the late 2030s, an energy consultant warns.
Cornwall Insight believes that a combination of high gas prices will keep power costs above pre-2022 levels in the short term, and over the longer term, soaring demand for electricity as Britain decarbonises.
The stark warning comes after energy regulator Ofgem’s price cap fell to £2,074 for a duel fuel household at the start of the month, from its previous level of £3,280 in April.
In August 2021, the last time it was set before the Russian invasion of Ukraine, Ofgem’s price cap was £1,277.
Consumers have been protected by the Government’s energy price guarantee which capped the typical bill at £2,500 since October 2022.
However the fall in the price cap below that threshold means that power bills have finally started to come down. Electricity currently trades at around £90 per megawatt hour.
However, Cornwall said that this will carry on rising, peaking at around £140mwh mid-2024, due to high expected gas prices and the need to build up supplies to ensure continued gas-powered power generation.
Gas prices will also stay high due to Europe’s need to source non-Russian supplies.
Cornwall said power prices will start to fall in the middle of the decade, as more renewables are used.
But this will be accompanied by a surge in demand for electricity to power transportation and heating, as Britain transitions away from fossil fuels.
That will place increasing strain on the National Grid, and as a result, to keep up with demand, it will have to pay generators more to produce power, costs that will ultimately fall on the heads of households and businesses.
Additionally, as France’s ageing nuclear power capacity deteriorates, Cornwall warns that Britain will end up exporting more power to Europe over the next decade, which will keep prices above pre-pandemic levels.
Tom Edwards, senior modeller at Cornwall Insight, said: “The challenges of rising power demand, increasing exports and reliance on gas continue to keep our power price forecasts above historical levels for many years to come,” he said.
Edwards added that the Government and the energy sector needs to boost investment in green energy and battery storage technologies now, to ensure Britain has adequate, continued energy supplies.
“This will bolster the chance of success in our transition to a sustainable future,” he said.
