Wholesale electricity prices to remain at current levels to 2020 – say analysts

Wholesale electricity prices in the UK are poised to remain flat until 2020, according to a report.Declining demand, weaker gas prices and the roll-out of offshore wind will keep Britain’s wholesale electricity prices close to their current levels for the rest of the decade, the report by credit rating agency Moody’s Investors Service said.

Scott Phillips, Moody’s Vice President and Senior Analyst, said:

“We believe that widely expected tightness will be short-lived as energy-efficiency gains, the roll-out of offshore wind power and the return of mothballed gas plants will keep prices in check.

“Our view is that power prices will stay around current levels, or £48-53/MWh, through the end of the decade.”

Political uncertainty continues rising consumer energy bills, a fierce debate about the increasing cost of living and next year’s General Election all mean that the political and regulatory risk environment for UK utilities remains challenging. Moody’s noted.

These conditions are set to persist, the ratings agency noted, due to the conflict between the cost of decarbonisation and affordability.

Although the UK Government has not yet introduced measures that have affected profits, analysts think that this will change.Prices could even fall.

But Moody’s added that an accelerated decline in electricity demand could cause prices to fall. Prices could also drop if the UK abandons its minimum carbon price, although the rating agency does not expect this to happen. Moody’s also suggested that an increase in gas prices owing to supply shocks, a lack of a roll-out of offshore wind and a more aggressive closure of thermal plants could cause power prices to rise.