Domestic UK energy bills could rise by 60% by 2016 in a worst-case scenario identified by the energy regulator.
However, most other estimates outlined in the Ofgem report would see prices rise between 14% and 25% above inflation by 2020. The review also said that up to £200bn of investment was needed to secure supplies and to meet carbon targets. Volatile gas markets and power stations nearing the end of their use were the chief concerns, the regulator said.
The report was the result of Project Discovery, a scheme that Ofgem started in March, in which it outlines four possible scenarios for energy use and security in the next 10 to 15 years. The scenario in which prices could spike by 60% was that of a strong resurgence in global economies, along with missed renewable and carbon targets, and no nuclear facility built before 2020. The report said the cheapest future scenario – with an increase in bills of 14% by 2020 – factored in a slow recovery from the recession, coupled with global green stimulus packages. In this option, high carbon prices and government policies would support investment in renewables, nuclear and carbon capture and storage. But significant changes were needed in the way energy was generated and consumed, the report added. “These are big challenges. Consumers are already enduring high energy prices,” said Ofgem chief executive Alistair Buchanan.