Energy Bills 'Set To Rise' Ofgem Warns

Britain's fossil fuel energy supplies are on a rollercoaster and heading downhill fast, according to the head of industry regulator Ofgem.

Chief executive Alistair Buchanan issued the stark warning to consumers and businesses to prepare for higher prices as power plants close, foreign gas supplies shrink and increasing demand tightens the British energy market.

Mr Buchanan, writing in The Daily Telegraph, said: "We have to face the likelihood that avoiding power shortages will also carry a price.

"If you can imagine a ride on a rollercoaster at a fairground, then this winter we are at the top of the circuit and we head downhill - fast.

"Within three years we will see reserve margin of generation fall from below 14% to below 5% - that is uncomfortably tight."

Mr Buchanan also said that in addition to no new nuclear or clean coal capacity increase, there would be no new "carbon capture" before 2020.

As a result, gas will increase as an energy source for power stations - from 30% now up to a possible 70% in the next seven years.

But he said Ofgem would not let companies take advantage of consumers.

Renewable energy still only makes up a small portion of the UK energy mix

"Just when we need more gas, world demand for gas is set to rise while our own supplies are predicted to fall by another 25% by 2020," Mr Buchanan explained.

The Government said it was acting to prevent any possible "looming energy gap".

But a spokesman for the Department of Energy and Climate Change (DECC) said: "Our energy system faces significant challenges over coming years, including the closure of around one-fifth of our ageing power stations.

"So as Ofgem highlights, we cannot afford to be complacent and may face a looming energy gap.

"The reforms we are making to the electricity market through the Energy Bill and through our gas generation strategy are aimed at plugging this gap in order to keep the lights on.

The DECC spokesman added: "We have legislated to introduce a capacity market that will help guard against blackouts and ensure there is sufficient supply when margins get tight.

"We are opening up the electricity market to incentivise a record £110bn of private sector investment in new clean power generation - in renewables, new gas, nuclear and carbon capture and storage.

"We can't put all our eggs in one basket, we need a diverse energy mix - this is the best solution to guard against high price of wholesale gas which drives up consumer bills."

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