What’s on the energy horizon –
shortages and price hikes?

By Graham Borét, senior energy consultant, Energy Renewals

It’s that time of year when warnings of winter shortages and price hikes begin to seep into our newsfeeds despite the unseasonal but welcome soaring September temperatures.

But don’t panic, the lights are not about to go out and even a report in The Independent, the most recent we found warning of price hikes and shortages, concluded with a reassuring message from the National Grid which pointed out margins between supply and demand in September and October appearing ‘tight’ were ‘usual’.

However, there’s no doubting two major influences are currently impacting the market: energy prices have been creeping up since the EU referendum and the UK is experiencing a diminished supply.

The former is a direct result of our decision to exit the EU and the subsequent drop in value of the pound making imports more expensive.

Co-op Energy increased its prices by 3% on standard tariffs and GB Energy prices went up 7%, according to price comparison website Energy Helpline although prices are still cheaper than they were three years ago.

Uswitch, also an energy comparison website, reports the same trend highlighting 12 suppliers which have replaced fixed energy plans with more expensive deals following the vote to leave. The Guardian’s report points out smaller companies are more likely to feel the impact of a devalued pound than the ‘big six’ energy companies.

More worryingly, though, is the UK’s diminishing ability to generate electricity versus the demand from its citizens, an issue apparent way before the referendum. A report in February from the law firm Bircham Dyson Bell LLP The Energy Crunch explains it well, but again assures readers the lights will remain on although it warns of price rises for consumers and businesses.

Key findings of the report include:-

  • The UK has reduced its means to generate electricity by 13,767MW (power for 1.6 million homes) since 2012 as a result of power station closures
  • This will decline further by 2020 when we are set to lose another 6,827MW (0.8 million homes)
  • In the years to follow, we will see the disappearance of another 18,009MW (2.2 million homes)
  • Together it represents a loss of capacity of 38,603MW from 2012 to 2030 (enough to power 4.6 million homes or 18.4% of total UK homes)

Writing in The Telegraph, Tony Lodge, a research fellow at the Centre for Policy Studies who also provided evidence to the Commons Energy Select Committee ahead of the referendum, blamed Europe for the UK’s energy policy failings. EU policies led to the premature closure of the UK’s coal and oil fired power stations before cleaner gas-fired power stations could replace them, he argued, in turn this has led to imports of foreign electricity increasing by 30% over the past two years.

Of course, the solution is arguably relatively straightforward: invest in the energy sector and open the power stations we need to generate the energy we demand. Even if the investment was made available tomorrow, the strategy is a long term one which, unfortunately, means we will be paying higher energy bills, even if the pound rebounds. We advise consumers and businesses to shop around and switch to a fixed tariff as the signs are all there for further price increases in the short term.
There is one point we have overlooked and that’s our responsibility to consume less energy both in the workplace and at home. If we use less energy, our bills will reduce and the environment will benefit. A concerted effort on all our parts to reduce our energy usage would take the pressure off our supply which means whilst our appetite for energy is indeed part of the problem; we can also be part of the solution.