Energy analysts warn that Britain’s aged fleet of nuclear and gas power plants will continue to drive up prices until the end the decade. Prices are predicted to rise in order to cover the gaps in renewable energy production.
Cornwall Insight, an energy forecaster, said that the price paid to generators of electricity to maintain the UK grid’s stability would be at least £51 (£18) per kilowatt by 2030. This is a substantial increase over the current rate of £18.
In the UK, operators of power plants are paid to meet demandfor electrical generation at times when renewable energy sources like wind and solar are weak.
The current prices were set in 2020 and 2025. However, the latest auction results show that the cost to provide backup capacity can spike as high as £65 per kW.
Cornwall Insight stated that prices are only expected to drop to about £51 per kW in 2030. The high costs will be passed onto consumers through their energy bills.
Analysts said that as existing power plants, especially gas and nuclear, become less reliable, they will reduce their operating hours and require higher prices on the Capacity Market in order to cover costs.
Battery storage and other new technologies that could help meet the demand are currently also more expensive.
The uncertainty surrounding the operating start date of Hinkley Point C and the life extension of certain nuclear power plants will also contribute to the high prices.
Tom Faulkner is the head of product development for Cornwall Insight. He said that while battery storage solutions could help meet some of this demand, they are expensive and require higher payouts.
“At the end of the day, the cost to consumers is the refurbishment of the old plants.”
Gas prices have soared since the Russian war in Ukraine.
According to Ofgem, the average household bill is expected to drop by 7pc starting in July. This will bring down the typical annual energy bill to £1,568.
Cornwall Insight believes that prices will begin to rise again in October.
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