Wholesale price of energy will remain flat and possible fall according to research from ratings agency Moody, which will be welcomed by consumers.
Better insulation in houses, new offshore wind farms are likely to halt an expected rise in retail prices, together with the possibility of weaker gas prices.
The fear of an energy crunch, which could take the lights out as soon as this winter or next will be a temporary one, with capacity margins rising to 20% by 2020.
“We believe that widely expected tightness will be shortlived as energy efficiency gains, the rollout of offshore wind power and the return of mothballed gas plants will keep prices in check”, said Scott Phillips, Moody’s vice president and senior analyst. “Our view is that power prices will stay around current levels, or £48-53 per megawatt hour, through the end of the decade”, he added.
The energy sector have warned that prices are on an increasing trajectory, heightened by the government’s obligation to the environmental issues.
Moody does not share this view fully, stating “While the reserve margin will likely tighten in 2015, which is positive for prices, we see it widening out again from 2016. Our view reflects a large amount of renewable capacity to be added onto the electricity grid, particularly in offshore wind (reaching 10GW by 2020) and solar photovoltaic (reaching 7GW by 2020).
“These additions will be supported by the UK government’s Contract for Difference (CfD) subsidy mechanism, introduced to encourage the deployment of renewables and to help meet the UK’s legally binding renewables target.”
Ofgem warned earlier this week that customers will face an ‘outside chance’ of a dip in electricity during the winter, as the National Grid tries to combat the supply and demand.