Energy price shock warning from City analysts
Government ministers have “grossly underestimated” the economic, engineering and financial challenges of switching the UK from fossil-fuels to renewable energy and consumers could pay the price through higher electricity costs, according to City analysts.
Peter Atherton and Guillaume Redgwell, equity analysts at Liberum Capital, accused the UK Government of playing “Russian roulette” with its energy policy.
Power companies may be forced to spend more buying energy on wholesale markets in order to keep the lights on, the analysts warned. Electricity bills could be pushed up by up to 25%, which would push the average household bill up to £690 a year from £550.
switching within 15 years could be ‘impossible’
The analysts said: “Moving from a largely fossil-fuel based power system to one dominated by renewables and nuclear in just a decade and a half, whilst keeping the lights on and consumer bills affordable, may simply be impossible.
“Even with the large increase in public support provided by the Energy Bill it is extremely hard to envisage that this finance will be forthcoming given that the large European utility companies are actually reducing capital expenditure.”
They compared the situation to that faced by the gas market in the mid-2000s, when North Sea production fell faster than expected, leading to more gas being imported.
“A similar move on power prices could easily push winter season wholesale prices up to the £70 to £80 per megawatt-hour range, compared with £53 today,” they warned. “Such a move would be likely to increase retail electricity prices up by some 15% to 25%.”