The energy crisis could be far from over, according to Cornwall Insight. According to the company’s research, it notes that it’s certainly possible for volatile wholesale energy prices to continue into 2030 and beyond.
Of course such a long-range forecast isn’t a foregone conclusion, which Cornwall Insight acknowledges, although it notes that if the current conditions continue it’s likely. However, if the UK was to develop a long-term strategy to cope with changes in energy production and unstable economic, geopolitical and ecological systems, it’s certainly possible that prices will be less volatile.
Cornwall Insight’s Benchmark Power Curve, which looks at energy investment and operational decisions over a 30-year period, forecasts that from 2026 prices could become increasingly volatile, jumping by £95/MWh between the summer and winter and the seasonal differential will increase to nearly £120/MWh by 2030.
A combination of just in time energy procurement, an overreliance on insecure energy imports, increased weather risks and a reduction in nuclear and coal power stations will leave the UK energy prices vulnerable to instability into the next decade, unless action is taken, the forecast suggests.
Tom Edwards, Senior Modelling Consultant at Cornwall Insight, noted, “With all the focus of the recent energy crisis being on wholesale prices for the short-term and the imminent price caps, you would be forgiven for thinking that volatile energy markets are simply a problem for the present, not the future. As our research shows, without significant changes to the way we procure, supply, and consume energy, we are likely to see many years of boom-and-bust energy pricing in the UK.
“Looking ahead to the start of the 2030s, we can see that once the nuclear power stations start to retire in greater numbers and the coal fired power stations have closed for good, there is a new period of volatile pricing coming to the UK energy market.
“Our overreliance on imported energy will also leave us vulnerable to variable pricing, with supply chain disruptions, geopolitical tensions and economics shifts, all having the potential to spill over into our market.
“Increasing the UK’s longer-term energy storage facilities could go a long way to reducing seasonal variations, helping to harness the locally generated energy from high renewable output periods for use when it’s still, cold and dark.
“It will also be important to deliver change on the demand side, with investment in energy efficient housing and electric vehicles having the potential to considerably reduce the level of power plant capacity needed.
“Looking further ahead, policy makers must understand that the market designs of the next 20-30 years cannot rely on stable economic, geopolitical, or ecological systems. A greater focus on resilience and risk above efficiency and low costs across our economy is needed. This will include a significant role for the state, especially if they are to guide us through the enormous technical and sociological changes required to deliver the net zero ambitions industry and government have promised to the electorate.”