Electricity price-rise pain may be worse than expected

Ofgem warns of power outages within years in face of dwindling spare capacity

Britain could be in for a higher jump in electricity prices than previously thought after the energy regulator warned yesterday that the country faces substantial power shortages within three years.

Speaking after Ofgem said spare electricity-generation capacity, known as the margin, is set to tumble from 14 per cent now to just 4 per cent over the winter of 2015/2016, Consumer Focus warned that this would put further pressure on prices.

"Narrower margins mean the risks of outages are higher, and scarcity of energy could also feed into possible price increases in future. Consumers need protection from price spikes as well as power cuts," said Audrey Gallacher, Consumer Focus director of energy.

Ofgem conceded that falling domestic generation would make Britain increasingly reliant on imported gas, putting further upward pressure on prices. The average dual-fuel gas and electricity bill is currently at a record high of about £1,300 a year, and had been forecast to rise substantially in the coming years – even before yesterday's stark warning.

"There will be a significant reduction in electricity supplies from coal and oil plants over the period [to 2015], primarily driven by closures required by European environmental legislation," an Ofgem spokesman warned. "The high level of spare capacity in the electricity market is set to end quite rapidly over the next few years."

Nine UK-based coal and oil fired plants with a combined generating capacity of 11.5 gigawatts are due to close by 2015, of which four are expected to cease generation next year. Energy UK, the industry body, said Ofgem was right to highlight the challenges it faces in the coming years.

"We must secure over £150bn of investment in the UK to replace aging power stations and infrastructure, keep the lights on and meet our carbon targets — all while making sure bills are affordable for the millions of homes and businesses," said Angela Knight, Energy UK's chief executive.

Meanwhile, the trade union Prospect, whose members include 21,000 staff in nuclear decommissioning and energy supply, called for government action to avert power shortages.

"This report highlights how imperative it is for the government to act now and introduce electricity market reform that ensures the programme of new nuclear build and other vital energy infrastructure projects, such as carbon capture and storage, are attractive enough to secure the long-term investment they require," said Prospect general secretary-designate Mike Clancy.

Energy Secretary Ed Davey said the government would respond to Ofgem's report by the end of the year.

"Security of electricity supply is of critical importance to the health of the economy and the smooth functioning of our daily lives," Mr Davey said, adding that Britain's energy industry faced "unprecedented challenges".

The government is in the midst of its electricity market reform (ERM), which is designed to support investors in new low-carbon electricity such as nuclear and renewable generation.

The support is expected to come through contracts for difference (CfDs) – essentially a long-term price contract for the electricity. However, the government has yet to decide how much these will be worth, making it difficult for investors in new plants to determine their economic viability.

Suggested Topics
Arts and Entertainment
Gregg Wallace in Summer's Supermarket Secrets
tv All of this year's 15 contestants have now been named
Arts and Entertainment
Inside the gallery at Frederick Bremer School in Walthamstow
tvSimon Usborne goes behind-the-scenes to watch the latest series
Life and Style
A picture taken on January 12, 2011 shows sex shops at the Paris district of Pigalle.
newsThe industry's trade body issued the moratorium on Friday
News
Winchester College Football (universally known as Winkies) is designed to make athletic skill all but irrelevant
Life...arcane public school games explained
PROMOTED VIDEO
Arts and Entertainment
Could we see Iain back in the Bake Off tent next week?
tv Contestant teased Newsnight viewers on potential reappearance
Life and Style
Silvia says of her famous creation: 'I never stopped wearing it. Because I like to wear things when they are off the radar'
fashionThe fashion house celebrated fifteen years of the punchy pouch with a weighty tome
News
i100(and it's got nothing to do with the Great British Bake Off)
News
Angelina Jolie with her father Jon Voight
peopleAsked whether he was upset not to be invited, he responded by saying he was busy with the Emmy Awards
News
Bill Kerr has died aged 92
peopleBill Kerr appeared in Hancock’s Half Hour and later worked alongside Spike Milligan and Peter Sellers
News
news It's not just the world that's a mess at the moment...
Sport
footballPremiership preview: All the talking points ahead of this weekend's matches
News
Keira Knightley poses topless for a special September The Photographer's issue of Interview Magazine, out now
people
News
ebooksAn evocation of the conflict through the eyes of those who lived through it
Voices
The Ukip leader has consistently refused to be drawn on where he would mount an attempt to secure a parliamentary seat
voicesNigel Farage: Those who predicted we would lose momentum heading into the 2015 election are going to have to think again
Arts and Entertainment
Cara Delevingne made her acting debut in Anna Karenina in 2012
film Cara Delevingne 'in talks' to star in Zoolander sequel
News
i100
Sport
Mario Balotelli pictured in his Liverpool shirt for the first time
football
Life and Style
tech
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Data Scientist (SQL,Data mining, data modelling, PHD, AI)

£50000 - £80000 per annum + benefits+bonus+package: Harrington Starr: Data Sci...

SAS Business Analyst - Credit Risk - Retail Banking

£450 - £500 per day: Orgtel: SAS Business Analyst, London, Banking, Credit Ris...

Project Manager - Pensions

£32000 - £38000 Per Annum Bonus, Life Insurance + Other Benefits: Clearwater P...

KYC Analyst, Birmingham - £200-£250 p/d

£200 - £250 per day + competitive: Orgtel: KYC Analyst, Key Banking Client, Bi...

Day In a Page

Ukraine crisis: The phoney war is over as Russian troops and armour pour across the border

The phoney war is over

Russian troops and armour pour into Ukraine
Potatoes could be off the menu as crop pests threaten UK

Potatoes could be off the menu as crop pests threaten UK

The world’s entire food system is under attack - and Britain is most at risk, according to a new study
Gangnam smile: why the Chinese are flocking to South Korea to buy a new face

Gangnam smile: why the Chinese are flocking to South Korea to buy a new face

Seoul's plastic surgery industry is booming thanks to the popularity of the K-Pop look
From Mozart to Orson Welles: Creative geniuses who peaked too soon

Creative geniuses who peaked too soon

After the death of Sandy Wilson, 90, who wrote his only hit musical in his twenties, John Walsh wonders what it's like to peak too soon and go on to live a life more ordinary
Caught in the crossfire of a cyber Cold War

Caught in the crossfire of a cyber Cold War

Fears are mounting that Vladimir Putin has instructed hackers to target banks like JP Morgan
Salomé's feminine wiles have inspired writers, painters and musicians for 2,000 years

Salomé: A head for seduction

Salomé's feminine wiles have inspired writers, painters and musicians for 2,000 years. Now audiences can meet the Biblical femme fatale in two new stage and screen projects
From Bram Stoker to Stanley Kubrick, the British Library's latest exhibition celebrates all things Gothic

British Library celebrates all things Gothic

Forthcoming exhibition Terror and Wonder: The Gothic Imagination will be the UK's largest ever celebration of Gothic literature
The Hard Rock Café's owners are embroiled in a bitter legal dispute - but is the restaurant chain worth fighting for?

Is the Hard Rock Café worth fighting for?

The restaurant chain's owners are currently embroiled in a bitter legal dispute
Caribbean cuisine is becoming increasingly popular in the UK ... and there's more to it than jerk chicken at carnival

In search of Caribbean soul food

Caribbean cuisine is becoming increasingly popular in the UK ... and there's more to it than jerk chicken at carnival
11 best face powders

11 best face powders

Sweep away shiny skin with our pick of the best pressed and loose powder bases
England vs Norway: Roy Hodgson's hands tied by exploding top flight

Roy Hodgson's hands tied by exploding top flight

Lack of Englishmen at leading Premier League clubs leaves manager hamstrung
Angel Di Maria and Cristiano Ronaldo: A tale of two Manchester United No 7s

Di Maria and Ronaldo: A tale of two Manchester United No 7s

They both inherited the iconic shirt at Old Trafford, but the £59.7m new boy is joining a club in a very different state
Israel-Gaza conflict: No victory for Israel despite weeks of death and devastation

Robert Fisk: No victory for Israel despite weeks of devastation

Palestinians have won: they are still in Gaza, and Hamas is still there
Mary Beard writes character reference for Twitter troll who called her a 'slut'

Unlikely friends: Mary Beard and the troll who called her a ‘filthy old slut’

The Cambridge University classicist even wrote the student a character reference
America’s new apartheid: Prosperous white districts are choosing to break away from black cities and go it alone

America’s new apartheid

Prosperous white districts are choosing to break away from black cities and go it alone