Energy bills will stay high for at least 15 years, experts predict

Energy bills will remain high at least until the end of 2030, experts now predict, putting further pressure on household finances in the long run.

Analysts from Cornwall Insight, who have a strong track record of forecasting changes in energy bills, said ‘prices in Britain will not fall below 2022 levels until the late 2030s’.

Cornwall Insight said the UK will increasingly turn away from electricity and towards gas during this period, which will drive up electricity demand, and therefore prices.

For example, gas boilers are being phased out and cars that currently run on electricity and diesel are being replaced by electrically powered vehicles.

Stacking up: Households are struggling with skyrocketing energy bills, which started to rise from October 2021

However, gas will still be needed and prices there will remain high because of Russia’s ongoing war against Ukraine.

But energy prices are falling and are likely to fall further.

Wholesale electricity prices – the cost of electricity to power companies – have fallen to £130 per megawatt hour (MWh), compared to an average of around £215.43 last year.

Cornwall Insight thinks wholesale prices will fall to 2021 levels – £69 per MWh – by the end of the 2030s.

These wholesale prices affect how much consumers pay for energy, but not immediately.

That’s because wholesale energy costs fluctuate wildly. To get around this, energy companies ‘hedge’ themselves by purchasing gas and electricity well before they are needed.

They can do this months – and even years – before they really need it.

It means that our current monthly bills do not reflect today’s prices, but rather the wholesale costs from when the supplier first paid for the energy.

Tom Edwards, senior modeller at Cornwall Insight, said: ‘It is of paramount importance that the Government and other decision makers fully understand the pressing and urgent need for continued investment in renewables and innovative solutions.

“Now is the time to act. We need to invest in sustainable storage technologies, nuclear power and the use and storage of carbon capture that can effectively bridge the gap between intermittent renewable generation and maintaining consistent energy capacity, increasing the likelihood of success in our transition to a sustainable future.”

The average utility bill is now £2,074 a year – the level of the price cap set by regulator Ofgem. No home will pay more than £3,000 a year for energy because of the government’s energy price guarantee pledge, which expires in March.

In the short term, Cornwall Insight thinks the average utility bill will remain around £2,000 a year until at least March next year – the latest in-depth forecast it is prepared to make.

How to save money on energy bills

There are only two ways to save money on energy bills: use less energy or find a cheaper deal.

Most households are already aware of their energy consumption due to months of sky-high bills, and in the warmer months there is less to save anyway.

The main hope for consumers seeking cheaper utility bills is the return of cheaper flat rates.

Energy companies stopped offering new fixed rate deals after October 2021, when prices started to rise.

Why are energy bills so high?

Since the outbreak of the pandemic, demand for gas has soared, but supply is struggling to catch up. It has driven up prices and pushed up the cost of gas and electricity for both households and businesses.

This was exacerbated by the Russian invasion of Ukraine, which has put pressure on gas supplies across Europe.

Since then, more than 80 percent of homes have fallen on variable rates, regulated by the Ofgem price cap.

At the moment there is only one fixed energy rate for new customers, from So Energy.

This costs £2,047 per year for average energy usage and is available through the price comparison website Uswitch.

Three other energy companies, British Gas, Ovo and E.On, have fixed rates for existing customers. However, none of these deals will save consumers money as they are all priced higher than the current capped energy bill.

How to determine if a fixed rate deal is a good price

Flat rate energy rates tend to last 12 or 24 months, with some persistent irregular times such as 18 months.

It is not certain what energy prices will do in the future.

However, energy prices are unlikely to fall well below £2,000 a year for an average household over the next eight months.

If you can find a deal that’s cheaper than what you’re paying now, it’s likely to be cheaper for the next eight months, so it’s worth considering.

If you are offered a fixed rate energy deal that costs more than you pay now, it obviously makes no financial sense to take it out.

But some may appreciate the security and ability to budget knowing their monthly payments are set for the period of the fixed deal, and may be happy to pay a little more.

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