Loss of energy capacity will mean higher bills and risk of blackouts

The energy regulator, Ofgem, has warned that the UK is at risk from a shortfall of electricity within three years due to the closure of power stations as a result European Union (EU) environmental laws.

This could lead to electricity price increases of up to 50 per cent in the next four years, pushing hundreds of thousands of consumers into fuel poverty.

Ofgem’s report, based on a joint prediction along with the National Grid predicts that there is a one in 12 chance that the UK may have to go without power at certain times, potentially letting “the lights go out” in the UK as it did during the 1970’s.

The National Grid says that if a shortfall were to occur it would pull power from businesses before households, reducing the likelihood that families would be affected.

Audrey Gallacher, Director of Energy at Consumer Focus, said: “While there is enough generation capacity to mean that widespread power-cuts are still unlikely, narrower margins mean the risks of outages are higher and scarcity of energy could also feed into possible price rises in future.”

The report says that margins, the spare capacity of electricity generation, are expected to tighten from 14 per cent to just four per cent.

The EU environmental rules means that some UK oil and coal power stations are cutting off supplies and reducing their capacity. Ofgem says that the risk of a shortfall in electricity supply is most likely to happen in 2015-16.

Ofgem concludes that this will make the UK more reliant on electricity imports and is likely to raise the cost of electricity as well as meaning that the UK is no longer self-sufficient.

Read more: A step-by-step guide on how to find the cheapest energy deal

The regulator said that in 2009 it warned that the combination of the financial crisis, tough environmental targets and the closure of ageing power stations “would increase the risk to consumers' energy supplies and could lead to higher bills. Today's report shows that these problems have not gone away.”

In 2009, it predicted price rises of between 14 and 25 per cent to pay for the investment needed to build new low carbon power stations to raise the level of energy supply in the UK.

Alistair Buchanan, chief executive of Ofgem, said: “The unprecedented challenges facing Britain's energy industry, identified in Ofgem's Project Discovery, to attract the investment to deliver secure, sustainable and affordable energy supplies for consumers, still remain.”

The government welcomed the report and said that it hopes that its forthcoming energy bill will help secure supplies in the future.

Ed Davey, State for Energy and Climate Change Secretary, said: “Security of electricity supply is of critical importance to the health of the economy and the smooth functioning of our daily lives.

“That is why the Government is reforming the electricity market to deliver secure, clean and affordable electricity.”

At this time of the year, household energy bills begin to rise steeply as gas use increases in the winter.

SSE has announced a price rise adding £100 to an average annual dual fuel bill.

British Gas has warned that its 10 million customers can expect to see bills rise by a similar amount in 2013.

Earlier this month, Scottish Power and First Utility pulled their cheapest fixed rate energy deals that had no exit penalty.

Read more: Gas and electricity price cuts: The truth behind the headlines