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UK energy bills could rise by 60% by 2016

Monday, January 18th, 2010

Project Discovery is Ofgem’s most comprehensive review of Britain’s energy supplies. Today’s initial report outlines the challenges for Britain’s energy industry. To secure energy supplies and meet carbon targets investment of up to £200 billion is needed. This means customers could face potential price rises to fund this investment.

Energy regulator Ofgem has today highlighted the challenges to Britain’s gas and electricity supplies. Chief among these challenges are a growing exposure to a volatile global gas market and power stations nearing the end of their life.

Ofgem has drawn up four energy scenarios to assess the energy security risks over the next 10-15 years. They reveal a range of potential risks to supplies when exposed to shocks

Ofgem chief executive Alistair Buchanan said: “Our scenarios suggest that Britain faces a tough challenge in maintaining secure supplies whilst at the same time meeting its climate change targets.:

Britain will face significant levels of gas imports, in particular for gas power plants to replace lost nuclear and coal-fired capacity. This increases our exposure to uncertainties in the global gas market, supply disruptions and potential price increases.

Significant changes in the way in which we generate and consume power may be needed to manage the variability associated with increasing reliance on wind power.

Given the massive levels of investment needed, there is a high likelihood of rising consumer bills, especially if oil and gas prices continue their underlying rise since 2003.

“These are big challenges. Consumers are already enduring high energy prices,” said Mr 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.”

Ofgem have come up with four different scenarios that could happen in the future to our energy supplies, each scenario results in huge rises in our domestic fuel supply.

Scenarios:
Ofgem has drawn up four energy scenarios of the next 10-15 years to assess the risks for energy security. In the four scenarios there are reductions in carbon emissions of between 12% and 43% (from 2005 levels) and increases in energy infrastructure investment of between £95 billion and £200 billion. However the four scenarios would result in increases in domestic energy bills of between 14% and 25% by 2020 (from 2009 levels) – with the possibility that wholesale price spikes could lead to an increase in domestic energy bills of up to 60% in the interim.

Green Transition: Under this scenario there is a rapid economic recovery and a significant expansion in investment in green measures. Domestic renewables targets are met and energy efficiency measures are effective. GB gas demand falls but electricity demand increases due to greater use of electric vehicles and heat pumps. The effect on domestic consumer bills is an increase of 23% by 2020.

Green Stimulus: There is a slow recovery from the recession and restricted availability of finance. Governments around the world implement green stimulus packages to achieve environmental goals and boost economic activities. High carbon prices and government policies support investment in renewables, nuclear and carbon capture and storage. The effect on domestic consumer bills is an increase of 14% by 2020.

Dash for Energy: Global economies bounce back strongly but security of supply concerns prevail over meeting environmental targets. As a result GB renewables targets and the Government’s carbon budgets are missed. Competition between countries for energy resources results in tight gas supplies and high fuel prices. Planning and supply chain constraints prevent new nuclear plant from becoming operational before 2020. The effect on domestic consumer bills is an increase of more than 60% by 2016 before falling back.

Slow Growth: The recession continues resulting in investment in gas and electricity infrastructure being considerably lower than before the credit crunch. Low gas and electricity prices coupled with low carbon prices reduce incentives to build nuclear and renewable power plant. This results in an increasing dependence on imported gas for new gas-fired power stations. The effect on domestic consumer bills is relatively low in early years but an increase of 22% by 2020 as conditions tighten.

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Tags:energy news UK, green energy, high energy pricing, uk energy prices
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George Monbiot – Paying for green energy interview

Wednesday, July 15th, 2009

The ink isn’t dry on the government’s low carbon transition plan, and already the whingeing has begun. The talkshows are buzzing with complaints about the impact on energy prices. Some punters suggest that this will be the end of life as we know it: the government’s plans will wreck the economy and bankrupt struggling families.

There’s no doubt that fuel poverty remains an important issue in this country. It still accelerates the deaths of elderly people every winter. Being able to maintain your home at a habitable temperature is a basic human right. But the new plans will make no appreciable difference.

According to the government, the impact of all its climate change policies – old and new – will be to add an average of £92 (or 8%) to household bills between now and 2020. Does that sound like the end of life as we know it? If so, you have a short memory.

Between November 2004 and November 2005, the average wholesale price of electricity rose from 2.1 pence to 3.6 pence – by 71%. In the 12 months to February 2006, the wholesale price of natural gas in the United Kingdom rose by 75%. In the three years to that date, it rose from under 20p a therm to 70p – an increase of 350%.

Wholesale prices don’t translate directly into retail prices – the hit for householders wasn’t quite as great as that – but you get the general idea. The rate by which the wholesale price of gas rose between 2003 and 2006 was 160 times greater than the rate of increase in retail fuel prices likely to be caused by the government’s climate change programmes. Compared to the wild fluctuations in energy prices caused by geopolitics and resource constraints, this increase will be scarcely detectable. The signal generating such angst today will be lost in the noise.

Did the price rise of 2003-2006 cause the economy to collapse? No. That was achieved by other means. It made life harder for some people. The government sought to address this with its winter fuel allowance, and today it proposes to create “mandated social price support”, mostly focused on older pensioners on the lowest incomes. I don’t know whether this is sufficient to eliminate fuel poverty. We should keep pressing the government to ensure that it is.

But let’s get this straight: fuel poverty and the climate change programme have very little to do with each other, except inasmuch as government intends to help us insulate our homes, which means we’ll need less fuel to heat them. As the secretary of state Ed Miliband pointed out on the Today programme this morning, failing to replace our energy supplies will also raise prices: fossil fuels will become more expensive as a result of rising demand in China and India.

There is, however, a government policy, or absence of policy, which does threaten both to exacerbate fuel poverty and accelerate economic collapse: its flat refusal to make contingency plans for the possibility that global supplies of oil (and, presumably, gas) will one day peak. Peak oil and gas will wreck more than the government’s plans for eliminating hypothermia: it will make all current economic and environmental planning redundant. Yet, in the 228 pages of today’s white paper about our future energy supplies, you won’t find a word about it.

Original Source: The Guardian

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Tags:george monbiot, high energy pricing, low carbon economy, Peak Oil, uk energy issues
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UK energy bills increasing at twice the rate of EU

Wednesday, November 5th, 2008

The figures, which show UK bills have risen more than in almost any other developed nation, will once again raise the question about continental energy companies “picking the pocket” of British consumers. Four of the six biggest gas and electricity firms in the UK are European-owned.

According to the Organisation for Economic Co-operation and Development – a club of the world’s 30 richest nations – energy prices in the UK have increased by 29.7 per cent over the last year.

This is twice the rate of the European average and compares to 14 per cent in France and 12.2 per cent in Germany. Only Norwegian consumers are suffering from a higher level of energy inflation.

Ed Mayo, chief executive officer of the Government’s new super-watchdog Consumer Focus said: “The UK energy consumer is being clobbered faster and harder than those in Europe. Other countries may be doing more to keep their prices down and we should learn from them. The UK has a relatively free market, but the freedom to cut prices in the early years seems now to be the freedom to raise prices with impunity.

“Of course, those least able to afford it suffer most.”

The data comes less than a week after British Gas ruled out cuts in customer gas bills any time soon, claiming that wholesale gas prices remained too high for it to countenance such a move.

Energy experts point out that British consumers suffer more than their European neighbours because of both its reliance on the gas market and it lack of storage capacity. France, for instance, derives 37 per cent of its energy from its nuclear power stations, meaning it is less reliant on the volatile global gas price.

Britain also has invested far less in gas storage capacity, which means it is less easy for this country to buy gas when it is cheap and store it for the winter.

There is enough storage to supply the country with gas for just 13 days, compared with 99 days in Germany and 122 in France.

Householders have been hit by spiralling inflation – currently at 5.2 per cent – as well as rising bills.

A spokesman for the Energy Retailers Association (ERA) insisted that European companies were not “ripping off” their British customers.

Npower and e.on are German owned, while EDF is French and Scottish Power Spanish. The only two major companies that are still British owned are British Gas and Scottish & Southern Energy.

The spokesman for ERA said: “What the OECD’s figures fail to demonstrate is that British customers have enjoyed historically very low prices compared to Europe and indeed the rest of the world. Primarily this is due to us having our own vast reserves of natural gas in the North Sea and not being exposed to global prices in the same way as we are now.

“We are no longer an energy island. With increased demand from growing economies such as India and China, the prices we now pay for our energy are more vulnerable to fluctuations across the world,” she said.

The most up-to-date figures from Ofgem, the regulator, do suggest that British consumers enjoy slightly lower gas prices than the rest of Europe, while our electricity bills are in line with out neighbours.

However, these figures are from the end of last year, since when annual gas bills have increased in the UK by £277 on average to hit £834 – an increase of nearly 50 per cent.

Joint gas and electricity bills – dual fuel – have climbed from £912 at the start of the year to £1,303.

Scott Byrom, utilities manager at personal finance website MoneySupermarket.com, said: “UK consumers are going to be upset to see customer bills in Europe rise far less quickly. The Government needs to address the issue of lack of storage and make some serious investment.”

Original Source: The Telegraph

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Tags:energy news UK, high energy pricing, uk energy, uk energy price rises
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Why are UK energy bills still going up?

Friday, October 24th, 2008

Oil prices are plunging and the wholesale price of gas and electricity in the UK is trending downwards – so why are our fuel bills still going up?

The answer from the big energy companies – whose unpopularity has now only been eclipsed by the banks – is that it takes time before their lower costs feed into lower bills for consumers.

Suppliers like British Gas or E.ON UK either have to buy in electricity and gas from the wholesale markets to supply their customers, or they get it from their own power plants and from long-term gas supply contracts.

These utilities treat each division separately – so for example, E.ON UK has to buy power from its own generation arm. When it costs more for its plants to generate power, these get passed onto its retail arm, which in turn raises the price its customers pay. The opposite should happen when costs fall. Companies say it can take six months for these changes to feed through to customers. This means retail prices should start coming down soon.

Fair enough, in theory. But there is so little financial information or transparency about suppliers’ activities that it is hard to track their real costs. The publicly tradeable wholesale gas and electricity market is no longer an accurate measure of the ‘real’ cost of these commodities for energy companies as so little is traded in this way: most suppliers get their gas and electricity from within their own group. No-one knows what their real costs are because companies do not have to release the information. EDF’s impending takeover of British Energy – a standalone company providing about a fifth of the UK’s power – is another nail in the coffin of wholesale energy markets in the UK. Critics can be forgiven for not being inclined to take the companies at their word when they insist that bills will come down eventually.

Gordon Brown jumped onto the anti-energy company bandwagon this month when he called on suppliers to cut bills as their costs come down. It doesn’t help that many suppliers are only now notifying their customers by letter of the price rises they announced in August because of higher oil and gas prices.

So you can’t blame consumers for being confused – and angry. Companies need to open their books to explain what their real costs and profits are. But with four of the Big Six suppliers foreign owned, it’s especially hard for anyone – journalist, analyst or Government – to measure the flow of profit and investment between operations in different countries.

There was uproar when it emerged recently that French customers pay less for their electricity than those in the UK. This led to the accusation that British customers of French group EDF were subsidising customers in France. Much more likely an explanation – as EDF UK’s Vincent de Rivaz asserts – is that currently nuclear power, which provides most of France’s electricity, is cheaper than other forms like renewables or coal more common in the UK. But unless EDF – and the rest of the Big Six – open their books, we won’t know for sure.

This sad state of affairs is likely to continue. The British government is terrified that the energy companies won’t build the new reactors and wind farms needed to keep the lights on. Previous attempts to lean on them – such as the windfall tax – have ended in a humiliating climbdown by the government. This puts the big energy companies in a powerful position. Any move to force the Big Six to be more transparent about their prices is likely to end in a similar defeat – leaving energy consumers in the dark about their record fuel bills.

Original Source: The Guardian

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A very cold UK energy winter indeed

Friday, October 3rd, 2008

UK families will from today face paying spiralling energy costs as increases to electricity and gas bills are introduced.

Consumers will now have to pay almost 20% more for gas and 33% more for electricity.

The huge increase, announced last month, sparked concerns about the impact among the business community as well as householders who are already suffering from jumps in food and fuel prices.

From today Phoenix Gas customers face a 19.2% hike for domestic and small industrial and commercial customers.

The increase adds around £2.15 a week to the average household gas bill, resulting in an average customer paying £689 per year.

While NIE customers will be paying 33.3% more. This follows an earlier increase in gas prices of 28% four months ago.

Last month Phoenix Gas said large increases in wholesale gas costs left them with “no alternative” but to review prices.

However, when asked if they would consider introducing a cap on tarrifs, NIE Energy said it “does not currently offer fixed or capped electricity prices” like other UK energy companies.

It said it is “a regulated business operating under a price control, determined by the regulator, who acts on behalf of all consumers in the UK”.

Kerstie Forsyth from NIE Energy said: “We are concerned about the impact of this increase on our customers, particularly those on lower incomes.

“We can’t control world fuel prices, which have led to this increase, but what we can do is offer discounted electricity.”

He said: “Our customers can be assured that we are committed to delivering gas at the lowest possible price both now and into the future.

“If, as we hope, worldwide energy prices fall, Phoenix will reduce its prices accordingly.”

Michael Hughes, chief executive of the Rural Community Network, representing people in rural areas on issues relating to poverty and disadvantage, said many will struggle to pay high energy bills this winter.

“Statistically there is more unfit housing in rural areas than in urban,” he said. “Those are the houses that are harder to heat, the older house that the person has lived nearly all their lives and wouldn’t want to move.”

However he said that the current situation will prove a financially tough time for most people across the country.

“This is not the case for getting into a debate about people in urban and rural areas and who is poorer. There are disadvantaged in all areas, but this is also affecting people throughout the country who would normally be comfortably off.”

On Monday the Assembly backed plans for the Executive to spearhead an action plan to counter the effects of spiralling energy bills.

But Mr Hughes said: “The Executive needs to get working again urgently to deal with these issues and help those who have to choose between food or heat this winter.”

Original Source: The Belfast Telegraph

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