Energy bills could rise 60%, customers warned

The energy watchdog today said UK consumers faced potentially steep price rises in their gas and electricity bills as supplies become more volatile.

In a review of Britain's energy market, Ofgem said an investment of up to £200 billion is needed to secure supplies and meet environmental targets.

It lists four possible scenarios for the future and in one - that of a strong resurgence in global economies along with missed renewable and carbon targets - Ofgem warned prices could surge by more than 60 per cent by 2016 before falling back.



Ofgem said the cheapest scenario - with a hike in bills of 14 per cent by 2020 - factors in a slow recovery from the recession, coupled with global green stimulus packages.

In this option, high carbon prices and Government policies support investment in renewables, nuclear and carbon capture and storage.

Another scenario sees green measures coupled with strong economic growth and consumer bills rising by 23 per cent by 2020.

Ofgem said this would see Britain's reliance on gas fall, but demand for electricity would increase with a greater use of electric vehicles and heat pumps.

The regulator said that if the recession continues and gas and electricity prices remain low in the short term, it could reduce the incentive to build new nuclear and renewable power infrastructure.

In this scenario, the country would be increasingly reliant on imported gas for new gas-fired power stations and while bills would not rise by much in the early years, they are expected to climb 22 per cent by 2020.

Ofgem said the possibility of a 60 per cent hike in bills by 2016 would be caused if wholesale gas prices spiked as a result of resurgent global economies competing for energy resources.

This scenario also assumes that no new nuclear facility would become operational before 2020.

But the regulator said even in this scenario, bills would drop back and it predicts that by 2020 consumers would pay 25 per cent more than this year.

The four scenarios include reductions in carbon emissions of between 12 per cent and 43 per cent from 2005 levels.

Ofgem said the biggest challenges to Britain's energy supply are the country's growing reliance on a volatile global gas market and its ageing power stations, which are nearing the end of their lives.

The regulator also said "significant changes" may have to be made in the way we consume and generate power to manage the "variability associated with increasing reliance on wind power".

It said a "massive" investment of between £95 billion and £200 billion in power plants and other infrastructure was necessary "to secure both energy supplies and climate change targets".

Ofgem chief executive Alistair Buchanan said: "These are big challenges. Consumers are already enduring high energy prices.

"This is why we are consulting with consumer and environmental groups, the academic community and industry to ensure any policy proposals we make are grounded on the best evidence available.

"Early action can avoid hasty and expensive measures later."



Gary Smith, national officer of the GMB union, said: "This report demonstrates that central planning is essential to ensure that the lights stay on.

"How many more red light signals do our politicians have to see before they take action?"

Shadow energy secretary Greg Clark said the challenges in the energy sector came about because of Government "dithering".

He said the Tories would take "immediate action" to authorise five gigawatts of capacity in clean coal and publish planning guidance for companies wishing to invest in nuclear power - which he said ministers had held back without good reason.

"This is the characteristic over the last 12 years," Mr Clark said.

"There has been no policy, effectively. We are in the situation we are because they have had their head in the sand for 12 years."



Ofgem said current rates of investment would have to be more than doubled to meet the high levels needed.

Consumer bills will be pushed up by the level of infrastructure investment and by the increasing cost of carbon - particularly if oil and gas market prices continue to rise as they have been since 2003, or spike sharply.

Gas dependence is predicted to increase "dramatically", especially if environmental measures are not fully successful.

The regulator identified the greatest risk as maintaining gas supplies through a severe winter.

Ofgem said that while the outlook for this winter is "more comfortable" - with National Grid anticipating high capacity and good gas infrastructure - its analysis suggests "that existing regulatory and market arrangements may well be tested severely over the next two decades".

Today's report outlines the regulator's provisional assessment of supply issues and is due to make further recommendations - potentially including new policy - at the end of the year.



Association of Electricity Producers chief executive David Porter said Ofgem was "absolutely right" to call for investment in the energy sector.

He warned it was not possible to deliver changes "on the cheap", adding: "In the end, the customer does pay."

And he told BBC Radio 4's Today programme: "What we need to do is make sure that the political and regulatory framework that we operate in enables companies to make the right economic decisions, and then customers will have the least possible price increases."



Save up to £380 by switching your energy provider with Independent Compare

Arts and Entertainment
Sheeran arrives at the 56th annual Grammy Awards earlier this year
musicYes, that would be Ed Sheeran, according to the BBC
Sport
Rio Ferdinand, Alan Shearer, Alan Hansen and Gary Lineker during Hansen's final broadcast
Sport
News
newsBear sweltering in zoo that reaches temperatures of 40 degrees
Arts and Entertainment
Brendan O'Carroll has brought out his female alter-ego Agnes Brown for Mrs Brown's Boys D'Movie
filmComedy holds its place at top of the UK box office
PROMOTED VIDEO
News
Ian Thorpe has thanked his supporters after the athlete said in an interview that he is gay
people
Arts and Entertainment
Professor Kathy Willis will showcase plants from the Royal Botanic Gardens at Kew
radioPlants: From Roots to Riches has been two years in the making
Arts and Entertainment
TV The follow-up documentary that has got locals worried
Arts and Entertainment
Eminem's daughter Hailie has graduated from high school
music
Arts and Entertainment
Original Netflix series such as Orange Is The New Black are to benefit from a 'substantial' increase in investment
TVHoax announcement had caused outrage
Life and Style
Swimsuit, £245, by Agent Provocateur
fashion

Diving in at the deep end is no excuse for shirking the style stakes

News
One Direction star Harry Styles who says he has no plans to follow his pal Cara Delevingne down the catwalk.
peopleManagement confirms rumours singer is going it alone are false
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Arts and Entertainment
Curtain calls: Madani Younis
theatreMadani Younis wants the neighbourhood to follow his work as closely as his audiences do
Arts and Entertainment
'Deep Breath' is Peter Capaldi's first full-length adventure as the twelfth Doctor
TVFirst episode of new series has ended up on the internet
Life and Style
Douglas McMaster says the food industry is ‘traumatised’
food + drinkSilo in Brighton will have just six staple dishes on the menu every day, including one meat option, one fish, one vegan, and one 'wild card'
Sport
Mario Balotelli, Divock Origi, Loic Remy, Wilfried Bony and Karim Benzema
transfersBony, Benzema and the other transfer targets
Life and Style
Once a month, waistline watcher Suran steps into a 3D body scanner that maps his body shape and records measurements with pinpoint accuracy
techFrom heart rates to happiness, there is little this fast-growing, self-tracking community won't monitor
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

Information Security Manager (ISO 27001, Accreditation, ITIL)

£70000 per annum: Harrington Starr: Information Security Manager (ISO 27001, A...

Biztalk - outstanding opportunity

£75000 - £85000 per annum + ex bens: Deerfoot IT Resources Limited: Biztalk Te...

Trade Desk Specialist (FIX, Linux, Windows, Network Security)

£60000 per annum: Harrington Starr: Trade Desk Specialist (FIX, Linux, Windows...

Service Desk Analyst (Windows, Active Directory, ITIL, Reuter)

£35000 per annum: Harrington Starr: Service Desk Analyst (Windows, Active Dire...

Day In a Page

Iraq crisis: How Saudi Arabia helped Isis take over the north of the country

How Saudi Arabia helped Isis take over northern Iraq

A speech by an ex-MI6 boss hints at a plan going back over a decade. In some areas, being Shia is akin to being a Jew in Nazi Germany, says Patrick Cockburn
The evolution of Andy Serkis: First Gollum, then King Kong - now the actor is swinging through the trees in Dawn of the Planet of the Apes

The evolution of Andy Serkis

First Gollum, then King Kong - now the actor is swinging through the trees in Dawn of the Planet of the Apes
You thought 'Benefits Street' was controversial: Follow-up documentary 'Immigrant Street' has got locals worried

You thought 'Benefits Street' was controversial...

Follow-up documentary 'Immigrant Street' has got locals worried
Refugee children from Central America let down by Washington's high ideals

Refugee children let down by Washington's high ideals

Democrats and Republicans refuse to set aside their differences to cope with the influx of desperate Central Americas, says Rupert Cornwell
Children's books are too white, says Laureate

Children's books are too white, says Laureate

Malorie Blackman appeals for a better ethnic mix of authors and characters and the illustrator Quentin Blake comes to the rescue
Blackest is the new black: Scientists have developed a material so dark that you can't see it...

Blackest is the new black

Scientists have developed a material so dark that you can't see it...
Matthew Barzun: America's diplomatic dude

Matthew Barzun: America's diplomatic dude

The US Ambassador to London holds 'jeans and beer' gigs at his official residence – it's all part of the job, he tells Chris Green
Meet the Quantified Selfers: From heart rates to happiness, there is little this fast-growing, self-tracking community won't monitor

Meet the 'Quantified Selfers'

From heart rates to happiness, there is little this fast-growing, self-tracking community won't monitor
Madani Younis: Five-star reviews are just the opening act for British theatre's first non-white artistic director

Five-star reviews are just the opening act for British theatre's first non-white artistic director

Madani Younis wants the neighbourhood to follow his work as closely as his audiences do
Mrs Brown and her boys: are they having a laugh?

Mrs Brown and her boys: are they having a laugh?

When it comes to national stereotyping, the Irish – among others – know it can pay to play up to outsiders' expectations, says DJ Taylor
Gavin Maxwell's bitter legacy: Was the otter man the wildlife champion he appeared to be?

Otter man Gavin Maxwell's bitter legacy

The aristocrat's eccentric devotion to his pets inspired a generation. But our greatest living nature writer believes his legacy has been quite toxic
Joanna Rowsell: The World Champion cyclist on breaking her collarbone, shattering her teeth - and dealing with alopecia

Joanna Rowsell: 'I wear my wig to look normal'

The World Champion cyclist on breaking her collarbone, shattering her teeth - and dealing with alopecia
Bill Granger recipes: Our chef gives raw ingredients a lift with his quick marinades

Bill Granger's quick and delicious marinades

Our chef's marinades are great for weekend barbecuing, but are also a delicious way of injecting flavour into, and breaking the monotony of, weekday meals
Germany vs Argentina World Cup 2014 preview: Why Brazilians don't love their neighbours Argentina any more

Anyone but Argentina – why Brazilians don’t love their neighbours any more

The hosts will be supporting Germany in today's World Cup final, reports Alex Bellos
The Open 2014: Time again to ask that major question - can Lee Westwood win at last?

The Open 2014

Time again to ask that major question - can Lee Westwood win at last?