Energy supplies on ‘downhill rollercoaster’

In a stark warning about the UK’s energy future, the chief executive of Ofgem warned consumers and businesses to prepare for higher prices as power plants close, foreign gas supplies shrink and increasing demand tightens the British energy market.

Just next month, the UK is set to lose about 10 per cent of its generation capacity as coal- and oil-fired power stations close to meet environmental targets.

Ofgem’s Alistair Buchanan, writing in The Daily Telegraph, said energy supplies were on a “rollercoaster” and “heading downhill fast”.

He said: “We have to face the likelihood that avoiding power shortages will also carry a price.

If you can imagine a ride on a rollercoaster, then this winter we are at the top of the circuit and we head downhill – fast. Ofgem’s Alistair Buchanan

“If you can imagine a ride on a rollercoaster at a fairground, then this winter we are at the top of the circuit and we head downhill – fast. Within three years we will see reserve margin of generation fall from below 14 per cent to below 5 per cent. That is uncomfortably tight.”

He said there were no real new energy supply sources for the UK before 2020, but pledged that Ofgem would not let consumers take the hit of extra costs incurred by suppliers having to go “shopping round the world” for gas.

Energy ‘challenges ahead’

A government spokesman admitted there were “challenges ahead”.

He said: “Our energy system faces significant challenges over coming years, including the closure of around one-fifth of our ageing power stations, so, as Ofgem highlights, we cannot afford to be complacent and may face a looming energy gap.

“The reforms we are making to the electricity market through the energy bill and through our gas generation strategy are aimed at plugging this gap in order to keep the lights on.”

He said there was legislation to guard against blackouts and also pointed to an “opening up” of the energy market to incentivise private sector investment in new, clean power.

“We can’t put all our eggs in one basket, we need a diverse energy mix. This is the best solution to guard against high price of wholesale gas which drives up consumer bills.”