The cost of living crisis is affecting every family in the UK, and energy prices following the pandemic have skyrocketed. But experts now believe that the cost of electricity is likely to rise until at least 2030, provided that wholesale prices climb in line with current predictions. Let’s take a look at what the next decade has in store for the cost of electricity and how high the price of energy is likely to climb.
The price of electricity in the UK
In 2021, the price of electricity reached £100/MWh, and that price has increased to £250/MWh this year, ushering in an unprecedented rise in the cost of energy in the country. Research suggests that electricity prices are unlikely to return to prices less than the £100 mark until the early 2030s, highlighting just how troublesome the next 8-10 years are likely to be as far as electricity consumption is concerned.
Ofgem – the UK’s energy regulator – bases its energy price cap on the wholesale price of electricity. The cap is the maximum amount of money that utility companies are permitted to charge customers who are on standard default tariffs and is based on their typical usage. The fact that the price cap rose this year has plunged lots of families into financial difficulties, and this is something that looks set to continue throughout the 2020s.
What can we expect going forward?
Pre-2021, the average cost of electricity was £50/MWh in winter. But energy consulting firm Cornwall Insight has suggested that there’s very little chance that we will return to these sorts of prices in the next eight to ten years. They attribute the cost of electricity to the increasing high-cost peaking capacity, as well as the closure of some nuclear power stations. Based on their predictions, the average cost of electricity during the winter of 2025 will be around £150/MWh, three times higher than the average cost in 2020.
Ultimately, the future for electricity prices in the UK is bleak. But why is this the case? Why are we being charged so much for electricity? In addition to the contributing factors introduced above, the rising EU demand for non-Russian gas will continue. This has pushed global gas prices up significantly, and these higher prices have significantly increased the cost of producing power. Throughout the remainder of the 2020s, gas is set to continue as a marginal fuel source for power production.
Something else to consider is the fact that the UK is seeking to bring coal capacity to an end by April 2024. This will be coupled with the closing of most nuclear power stations. In other words, the price of energy will remain high as these macro changes are enacted. As the UK transitions away from fossil fuel reliance, it’s imperative that we have affordable alternative sources of energy, as we explain below.
Alternative sources of energy
With the soaring cost of energy likely to continue into the next decade, we need to accelerate our transition to renewable energy sources. At AceOn, we work with partners throughout the United Kingdom, looking at innovative ways of decreasing dependence on the Grid and offering families affordable alternatives to electricity. Our battery energy storage solutions are helping housing associations and local governments look at viable alternatives for families and are a long-term solution to the current energy crisis.
For more information about how our battery energy storage works or to request more information about partnering with AceOn, get in touch with us today.
