The energy regulator Ofgem should provide clear multi-year forecasts for electricity prices, according to a leading commentator. Nils Pratley argues that while the regulator can accurately predict the next quarterly price cap, it fails to offer medium-range outlooks that could help households and businesses plan for the future.
Currently, only a third of an electricity bill comprises wholesale costs, with the rest made up of 'non-commodity' charges. These include grid upgrades, carbon taxes, and payments for new nuclear plants. The National Electricity System Operator (Neso) projects that network charges will rise from £7.6bn this year to £12.1bn by 2029-30, a near-60% increase driven by a £70bn grid upgrade.
Balancing costs, which cover payments to turn off windfarms on windy days and turn on other sources, are also set to surge. Neso estimates these could rise from around £2bn a year now to as much as £8bn by 2030, before falling later if the grid build-out proceeds on schedule.
These trends have alarmed MPs. At a select committee hearing last autumn, EDF's UK chief executive warned that 'even if the wholesale price were to halve, bills will rise'. Octopus Energy's representative added that 'if we continue on the path we are on, in all likelihood electricity prices are going to be 20% higher – even if wholesale prices halve.'
Oxford University's Sir Dieter Helm described the UK as 'a very high-cost energy economy for the next decade and a half', citing the need to double grid capacity to accommodate intermittent renewables. The Climate Change Committee's chief executive, Emma Pinchbeck, also pointed to 'the 20-year trajectory' before lower running costs translate into lower bills.
Pratley concludes that while the energy transition has strong public support, there should be far greater official clarity about costs and how long it will take to reach a low-carbon system with affordable bills.
