Energy prices in Great Britain are to remain over £100/MWh annually, according to new research from Cornwall Insight.
This figure is significantly above the five year pre-2021 historic average of £50/MWh in winter and the even lower prices seen in pre-2021 summer, Cornwall Insight said.
Indeed, while its Benchmark Power Curve for the British Electricity Market shows prices will drop from the current level, they are expected to remain high.
In winter 2025, prices are predicted to rise to £150/MWh due to closures of nuclear power stations, delays to Hinkley Point C and increasing high-cost peaking capacity.
Cornwall Insight said that while renewable generation will rapidly increase to meet targets and help meeting rising demand, marginal gas-fired generation sets power prices, with gas set to remain the marginal fuel source for producing power throughout the remainder of the 2020s.
Tom Edwards, senior modeller at Cornwall Insight, said that stabilising and reducing power prices will take two steps, the first of which is to reduce reliance on volatile fossil fuel prices by diversifying supplies and increasing renewable generation.
He said the government’s ambition of building new nuclear and reaching 50GW of offshore wind by 2030 – targets outlined in the British Energy Security Strategy – are important, but should “also be matched by removing barriers to onshore wind and solar PV”.
The lack of commitments to onshore wind in the British Energy Security Strategy was highlighted by a number of organisations in the sector following its publication, with Alethea Warrington, campaigner for the charity Possible, stating "the government simply refuses to recognise the role that onshore wind has in scaling up renewables".
It followed RenewableUK calling for reform to the planning regime for onshore wind as well as for a rise in the amount of onshore wind capacity available in the Contracts for Difference (CfD) scheme.
The second step to stabilise and reduce power prices is increasing flexibility and stability of the power supply, ensuring GB has the capacity to back-up short-term variations in renewable power supply as well as the infrequent longer periods of low winds.
Edwards said this will involve investment in long-duration energy storage including pumped storage and hydrogen storage.
“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,” Edwards said.
“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.”
He did, however, welcome the government’s Review of the Energy Market Arrangements (REMA), which is set to look at the current energy markets and whether or not they’re fit for net zero.
In the latest Current± Briefings webinar, Charles Wood, deputy director of policy for Energy UK, also referenced the REMA paper, suggesting this needs to move faster and that there isn't currently enough movement within the market mechanisms when it comes to energy storage.