UK homes and businesses will have to pay nearly three times more for electricity next year than government forecasts made a few months ago, putting heavy pressure on the household budget and macroeconomic recovery, according to new analysis.
Energy think tank Amber calculated, the UK’s total spending on electricity would increase by £29bn to £47.5bn due to a steep rise in gas prices. Ember said the figures underscore how important it is to accelerate the transition from fossil fuels to renewable energy.
Its report, in particular. shared with Granthshala, using forward prices for electricity by 2022, calculated that the cost of electricity would be £150 per megawatt hour, up from £58.50 previously estimated by the government.
About 80 percent of the rising cost will be due to the rising price of gas, which is used to generate electricity.
Amber’s analysis also indicates that households and companies will face higher prices for the next year and beyond.
Markets have already priced in the fact that some of the reasons for rising gas costs are temporary.
However, even after removing the effects of factors such as a fire at a vital interconnector between France and the UK, prices are expected to remain well above levels seen before the pandemic.
Phil McDonald, chief operating officer of Ember, said: “Looking ahead, the gas market is assuming some of those issues have been resolved, so futures prices are slightly below the extraordinary prices we saw this week.
However, he added that rapid growth in energy demand in Asia would support gas prices in the long term.
“There’s huge growth, there’s a coal shortage in China, Japan will pay whatever it takes to import liquefied natural gas.”
“I think at the moment the market is telling us that the price will be higher.”
Amber is calling on the government to increase investment in renewable energy generation, particularly offshore wind, to protect the country from volatile fossil fuel markets.
Mr. Macdonald said: “The faster we switch off gas, the cheaper our bills will be. Renewable energy is already pretty cheap, it’s subsidized and we should be building more and more of it.
“Gas phase-out protects the UK from ongoing risk of unexpected price shocks”
Global fossil fuel market. “
Boris Johnson told a Conservative Party convention this week that the UK would increase its offshore wind capacity from 40 GW to 60GW.
Mr Macdonald said the current gas crisis is further evidence that the government must move more quickly and in a wider range of locations.
“At the moment offshore wind farms are very concentrated in the North Sea. If we expand this across the country the generation will be much less intermittent than it is now. If the wind isn’t blowing in one place it’s in another.”
“It solves a lot of the problem of intermittent supply. Then we can look at battery storage technology
“Companies are little prepared to make it, the government just needs to push them.”
The call came as industry leaders warned the government that they would soon be forced to close temporarily due to record-high gas prices.
Owners of energy-intensive sectors, including steel, ceramics and chemicals, met with Trade Secretary Kwasi Quarteng on Friday and called for more support.
Trade body UK Steel has said UK firms are unfairly disadvantaged by paying higher prices for energy than French and German rivals.
EU governments are also seen as more liberal in their support for trade. The Portuguese government has slashed network fees for companies, Italy has cut renewable levies on energy bills, and France has taken the relatively drastic step of offering guaranteed prices for bulk energy to industry.
UK consumers are facing price hikes, tax hikes and benefit cuts that threaten to squeeze the household budget.
Energy consultancy Cornwall Insight has forecast that the energy price cap, which sets a maximum level for bills for 15 million households, will rise from around £400 to £1,660 in April, on top of a 12 per cent increase implemented this month.
The government this week moved forward with cutting universal debt, which would take £1,040 a year out of the income of millions of low-income households. National Insurance contributions are also due to increase next April and income tax bands are frozen, meaning an effective tax hike for workers.
Credit: www.independent.co.uk /