Latest long-term power forecast from Cornwall Insight warns rising power demand, increasing exports, and continued reliance on gas will mean prices are likely to remain high for years to come
Power prices in Great Britain will not shift below 2022 levels until the late 2030, a new report from Cornwall Insight has warned.
In its latest GB Power Market Outlook to 2030 report the influential analyst firm predicted that surging demand for power driven by the transition to electric vehicles (EVs) and heating systems is likely to ensure electricity prices remain high even as more low cost renewables capacity comes online.
In the short-term, the analysts predicted the introduction of more low-carbon, cost-effective energy sources should help push prices downwards, with prices expected to fall below £100/MWh by 2028, two years earlier than previously projected.
However, the report argued that as 2030 approaches the transition to more affordable renewable energy resources will be accompanied by increased demand for power as electrification accelerates.
This increased demand is likely to be accompanied by the continued use of expensive gas power to ensure consistent power supplies during periods of low wind generation, the analysts said, which is expected to offset some of the cost savings delivered through the increased use of renewables.
In addition, the report noted that concerns surrounding the deteriorating state of French nuclear capacity means the UK is likely to export more power to the continent over the next decade, which could also contribute to the levelling out of prices at pre-pandemic levels.
As such, the analysts stressed the "critical importance of long-term preparedness" as the country progresses towards its net zero goals, highlighting the urgent need to develop batteries and other long-term storage solutions to ensure adequate energy capacity, even during periods when renewable power generation is limited. It reiterated that in the long term the transition to clean power technologies is likely to unlock multiple economic and environmental benefits.
Tom Edwards, senior modeller at Cornwall Insight, said the latest power forecast reveals a "changing and complex landscape" for the energy market.
"The challenges of rising power demand, increasing exports and reliance on gas continue to keep our power price forecasts above historical levels for many years to come," he explained.
"Despite these concerns, we continue to be optimistic about the positive impact of low-carbon, cost-effective energy sources and favourable gas price trends. We are pleased to see prices are expected to fall below £100/MWh sooner than previously anticipated, which offers consumers a glimpse of the benefits of the ongoing energy transition."
However, Edwards stressed that it is of the upmost importance that the government and other decision-makers fully comprehend the pressing need for continued investment in a range of clean energy sources and innovative grid solutions.
"The time to act is now," he added. "We must invest in long-duration storage technologies, nuclear power and Carbon Capture Usage and Storage that can effectively bridge the gap between intermittent renewable generation and maintaining a consistent energy capacity. This will bolster the chance of success in our transition to a sustainable future."
The prospect of a sustained historically high power prices will also send a signal to businesses that investments in energy efficiency upgrades, energy management systems, and onsite generation technologies are likely to continue to offer more competitive payback periods for the forseeable future.
