Cornwall Insight’s latest projections from its Q1 Power Curve suggest the drop in power prices will extend to the end of the decade.
Costs are being forecast at £82 per MWh for 2024/25 and £84 per MWh for 2025/26, significantly lower than its previous forecasts, as shown in the chart below.
According to the latest data, projected gas prices have significantly decreased, which could potentially provide relief to both businesses and households. The average gas price, which was predicted to be £94 per MWh in 2023-2024, has now dropped to approximately £79 per MWh as of March 2024.
Lower costs were fuelled by high gas stocks in Europe and a mild winter, but projections calculated in March suggest these prices will remain.
Cornwall Insight provides research and analysis on the British energy sector.
Senior modeller at Cornwall Insight, Tom Edwards, said: “These lower costs are not just a temporary blip but are part of a sustained shift towards energy affordability.
“This is a welcome ray of hope for households and businesses struggling with economic uncertainties.”
Further into the future, prices are expected to remain largely level through 2027, falling again from 2028 as gas prices go down due to the supply of Liquified Natural Gas (LNG) and fossil fuels—with a higher marginal cost—being replaced by new renewables, such as solar, and both onshore and offshore wind.
That said, forecasts are still substantially higher than historic averages. Europe’s reliance on international LNG has been identified as a key factor, especially after sanctions on imports from Russia.
Edwards stated that “tight margins for renewables developers combined with commodity prices staying comparatively high, mean substantial drops are unfortunately not currently on the cards”.
Previous research by the Climate Change Committee, published in October 2023, forecast that cancelling net zero measures would lead to rising energy bills and motoring costs for households.
Instead, the downward trend in prices presents a “crucial window of opportunity,” said Edwards.
“As we move forward, our forecasts show continued investment in renewable energy infrastructure is paramount. By diversifying our energy mix and continuing our drive for innovation, it is clear we can unlock a future where energy affordability becomes the norm, not a fleeting moment.”
