UK electricity prices will stay high until late in the next decade, one of the City’s leading experts on power markets warned today.
Cornwall Insight’s prediction will send a chill through hard-pressed households across London and will make unwelcome reading at the Bank of England, where officials are locked in a bitter fight with inflation, having already raised interest rates 13 times in a row.
The influential consultancy’s prediction will resonate in Threadneedle Street and across Westminster, where it could test pledges and plans to reduce inflation.
Cornwall Insight has risen to wider fame for its accurate and compelling analysis throughout the cost-of-living crisis, that was sparked by soaring energy prices after Russia’s Invasion of Ukraine.
In its latest GB Power Market Outlook to 2030, Cornwall said predicts “prices in Great Britain will not shift below 2022 levels until the late 2030s,” mainly due to “surging demand”.
Much of that comes from “the move to electric heating and transport over the next decade” which will also place “increasing pressure on the grid”.
There may be some relief in the short term, Cornwall added, helped by the arrival of what it called “low-carbon, cost-effective energy sources.” That should help prices under £100 per megawatt hour by 2028, earlier than it had previously predicted. But then, the “increasing electrificstion of the economy” will add to demand, further complicating the picture
“In order to ensure a consistent power supply during periods of low wind, gas will need to play a role in filling the gaps and maintaining system stability,” Cornwall predicts.
At the same time, Cornwall expects the UK to export more electricity to France as nuclear power capacity there falls, which will also support prices.
Tom Edwards, a senior modeller at Cornwall 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 also had some advice for those responsible for the UK’s electricity grid:
“It is of utmost importance that the government and other decision-makers fully comprehend the urgent and pressing need for continued investment in renewable energy sources and innovative solutions. The time to act is now. We must invest in long-duration storage technologies, nuclear power and Carbon Capture Usage and Storage.”
