Crippling energy prices are set to continue for some years, with analysts warning that pre-2021 prices are unlikely to return before 2030.
Households are already paying record prices as the latest energy price cap saw the average gas and electricity bill increase by an average 54% this month (April) for those on default dual tariffs. A further rise of 32% is expected in October when the cap is reviewed again later in the year.
Analysts at Cornwall Insight said UK energy bills will remain significantly above normal levels up to 2030 and even beyond.
Tom Edwards at Cornwall Insight said: “While we are used to seeing headlines depicting energy prices at an all-time high, unfortunately, while prices will reduce, our modelling shows that pre-2021 prices are not making a comeback this decade and likely beyond.”
He added: “Rising EU demand for non-Russian gas has pushed up gas prices across the world, and these higher prices have increased production costs for power, with gas set to remain the marginal fuel source for producing power throughout the remainder of the 2020s. With all GB coal capacity due to close by April 2024 and many nuclear power stations coming to the end of their lives, high power prices will continue to feed through into consumer bills.”
Cornwall Insight’s latest report found that prices will remain above £100/MWh annually. This is double the five-year pre-2021 average of £50/MWh in winter and the even lower prices in pre-2021 summer.
Analysts expect that while prices will drop from their current high, they will ultimately remain elevated. Prices are predicted to even rise to £150/MWh in winter 2025 due to closures of UK nuclear power stations, delays to the new nuclear power station Hinkley C in Southwest England and Russia’s war in Ukraine prolonging the energy crisis.
Laura Howard, energy expert at Forbes Advisor, added: “There are some grim certainties that give solidity to Cornwall Insight’s forecast. First, Russia is likely to be an international pariah for many years so most Western countries will look elsewhere for their oil and gas, squeezing supply and pushing up wholesale costs. Next, we will see fuel-hungry economies struggle to manage the change to renewable alternatives. And we will see a huge increase in the number of electric cars, with all that entails in demand for electricity.
“The world is in an inflationary period at the moment, with prices rising across the board. Given the additional mix of factors at play in the energy space, it is hard to be optimistic about the price of energy in the short, medium or long term.”
Can I fix my energy tariff to avoid the higher prices?
If you are on a standard variable rate, then you are unlikely to find a cheaper deal, as most providers have removed their cheap fixed rate deals. We do not yet know when such deals will return.
Take a look at our article – Energy bills have gone up – should you switch to a fixed price energy tariff? – where we explain whether it is worth switching to a fixed-price energy tariff.
Currently, the best way to save on costs is to keep your usage low. See 17 ways to cut energy costs as gas and electricity bills go up for our top tips to help you reduce your energy bills.
