Research by Cornwall Insight into Britain’s power market out to 2030 has shown that energy prices will remain greater than £100/MWh annually, with highs of £150/MWh in winter 2025 due to delays to the Hinkley Point C nuclear power plant, increasing high-cost peaking capacity and nuclear power station closures.
This is a significant increase to the five year pre-2021 historic average, which was just £50/MWh in Winter and even lower in Summer.
Although renewable generation is forecast to rapidly increase in the next decade, Cornwall Insight has warned that marginal gas-fired generation sets power prices.
Figure 1: Power price forecasts – average per fiscal year
“While we are used to seeing headlines depicting energy prices at an all-time high, unfortunately, while prices will reduce, our modelling shows that pre-2021 prices are not making a comeback this decade and likely beyond,” said senior modeller at Cornwall Insight, Tom Edwards.
“To stabilise and reduce power prices will take two important steps. Firstly, reducing our reliance on volatile fossil fuel prices by diversifying supplies and increasing renewables power generation. The government ambition to build new nuclear and reach 50GW of offshore wind by 2030 is an important and ambitious step but it should also be matched by removing barriers to onshore wind and solar PV.
“Secondly, we need to increase the flexibility and stability of the power supply. Ultimately, we must ensure we have the capacity to back-up short-term variations in renewables power supply, as well as the infrequent longer periods of low winds. This will involve, yet unpromised, investment in long duration energy storage including pumped storage and hydrogen storage.”
Edwards praised the Department for Business, Energy & Industrial Strategy’s (BEIS’) ‘Review of Electricity Market Arrangements’ (REMA), published on 18 July 2022 which looks to cut the cost of power amid sky-rocketing prices.
“Our power curve does little to alleviate consumer or supplier concerns over energy prices, and the government and other policy makers are simply not providing protection for power prices in the shorter-term. The next decade and beyond will see significant changes to the energy generation technology mix with renewables becoming more and more important. We must make sure that not only do we plan for long-term generation, but we work to design a wholesale market which supports investment in new low carbon capacity at the lowest possible cost to consumers. We welcome BEIS announcement of the Review of the Energy Market Arrangements (REMA) as part of the energy security strategy,” finished Edwards.
