Octopus Energy told a parliamentary committee that energy prices would rise 20% over the next 4 years, blaming network upgrade and policy costs that are added to bills. My solar installer (perhaps to justify the installation) said that prices would rise 7% each year, which is 31% over the same period. Over the past 4 years electricity prices have increased by 30%, since 2019 prices are 60% higher. Octopus’s numbers are believable.
The government refuted these claims and blamed Russia’s invasion of Ukraine and said that clean renewable power is the route to lower bills.
The wholesale price of gas has stabilised following the invasion but remains roughly twice what it was beforehand. Network charges have increased 54%, policy costs are almost three times higher.
Banking on Britain’s electricity system moving away from gas fixing the wholesale electricity price looks optimistic, it’s something that happens over 95% of the time at the moment. To achieve this will require either massive investment in clean energy and storage, or market reform.
I estimate that to decouple the gas price would require a renewables system with a capacity of at least 60 GW with storage capacity of at least three days at all levels in the system. When I last calculated the cost of this it was hundreds of billions of pounds, and the equivalent to at least £1000 per year on bills.
The only medium-term option for lower bills is market reform for wholesale and retail markets. Options include moving wholesale markets to pay as bid or separating green from gas generation markets. In retail markets consumers need to switch their use to overnight and smart meters need to be mandatory.
None of this is easy, but we have a green energy minister sitting in a parliament with a massive majority, it’s now or never.
