Households must prepare for a sharp rise in energy bills within two years as Britain comes “dangerously” close to power shortages, the chief executive of Ofgem has warned.
The country would become more reliant on foreign gas to generate electricity as European Union pollution laws meant the dirtiest coal-fired stations had to shut, said Alistair Buchanan, the regulator’s outgoing head.
He pointed out that gas was already 60 per cent more expensive in countries such as Japan that relied on imports. It was impossible to predict how high bills could go for British households, he said.
Ministers admitted that Britain faced a “looming energy gap” but blamed the previous government for agreeing to shut coal plants too quickly.
Nick Clegg, the Deputy Prime Minister, admitted that consumers could feel a “pinch” starting within two years. The Government was fighting to “keep the lights on”, he insisted.
Mr Buchanan warned that the “near-crisis” would occur between 2015 and 2018, pushing up bills. Blackouts were “not likely” but there would be a “double squeeze” on energy prices.
The UK would face “the horror” of greater reliance on gas just as its cost on world markets was expected to rise, he said.
The average household energy bill is more than £1,400 following a series of increases in the past six months. Prices have risen by almost a fifth in the past four years. Mr Buchanan told the BBC that nuclear power, many wind farms and clean coal technology would not be available until after 2020.
“So we’ll lean on gas and gas will account for about 60 per cent of our power station needs instead of 30 per cent as it does today,” he said.
“And in order to get hold of that gas we’re going to have to go shopping around the world. And just at the time that we’re tight on power stations, the world is going to go tight on energy gas prices. So you’ve got a double squeeze.”
He said it was very important for the Government to persuade people to use less energy.
Speaking to The Daily Telegraph, Mr Clegg said: “We are concerned about the knock-on effects of the decisions taken by Ed Miliband, when he was energy secretary, where he in effect ordered the switching off of some of this capacity.”
He added: “We’ve been open right from the beginning that this poses a dilemma for us where there is a particular pinch point as highlighted today by Ofgem, but we are seeking to navigate that by seeking new investment.”
Greg Barker, the climate change minister, also blamed Labour for failing to tackle the looming shortage of power plants “for a whole decade”.
Ofgem first warned that there could be a problem back in 2009, when it presented a report to the last government. Since then, the risk of a squeeze has grown worse, as plans to build more nuclear plants and wind farms have fallen behind schedule.
While Tory ministers have advocated the use of shale gas extracted through “fracking”, experts consider it unlikely that significant supplies could become available before 2020.
Tim Yeo, chairman of the Commons energy committee, said that he was worried that people were not sufficiently aware that higher energy bills were looming.
“I’ve been concerned for some time that we are not preparing the public well enough for what is likely to be further increases in energy prices,” he said.
“A lot of it depends on international gas prices over which we don’t have any control.”
He said that the only thing the Government could do was to encourage people to use less energy.
Charles Hendry, a Tory energy minister until last September, agreed that Britain faced a “really big challenge”.
He predicted that higher prices were more likely to hit in 2018 but that it would be impossible to predict how far bills could rise.
Mike O’Connor, the chief executive of Consumer Focus, said: “We need to do more to ensure our homes do not leak energy and we are calling on government to use the funds they raise in carbon taxes to insulate our houses to modern standards, saving the poorest in society money on their bills, as well cutting carbon emissions and creating jobs.”
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