Electricity prices set to rise in next decade
Friday, 17 December 2010 12:00
Electricity consumers look likely to face much higher bills in years to come as the government aims to provide incentives to energy companies to invest in new low-carbon forms of energy provision.
Chris Huhne, the Energy Secretary is preparing the ground for a White Paper in the spring of 2011 after a consultation period. Price comparison website uSwitch has estimated that bills are likely to rise by £500 a year. However, Chris Huhne has said that this price rise estimate is "absolutely bonkers" and that prices would rise by more if the investment in new forms of energy provision was not initiated.
Mr Huhne outlined the government's ideas by saying that there are four main aims.
Firstly the government aims to increase long-term certainty about investment in power generation by providing greater support to the price of carbon to encourage new entrants into the market.
Secondly, to introduce long-term contracts for low carbon generation to make clean energy more attractive, including top up payments to low carbon generators if the wholesale price of electricity is low.
Thirdly to make additional payments to develop reserve plants to ensure "the lights stay on" during periods of high demand and finally to limit the amount of carbon emissions from "dirty" power stations, including reinforcing current requirements that new coal power stations must incorporate carbon capture and storage.
The concern for households is that they will have to cover the brunt of the costs of investment through higher bills. The government previously stated they need to provide incentives for the energy companies to invest and many commentators believe this will take the form of guaranteed prices to ensure that the energy companies continue to make a profit after covering the cost of the new investment.
The industry regulator Ofgem has estimated that bills could rise by as much as 25% over the coming decade.
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