Renewables investment is reducing UK power prices

16 August 2022

Cornwall Insight’s latest report – ‘GB Power Market Outlook to 2030’ – shows greater investment in renewables by countries across Europe, which has resulted in lower price projections in GB from 2024 until 2030. This is compared with the company’s first report, published three months ago.

Renewable investment has increased largely as a response to the war in Ukraine. Despite the fall, predicted prices are still set to remain above the pre-2021 historic average.  

In the first ‘GB Power Market Outlook’ of 2022, power prices were predicted to stay above £100/MWh annually; however the new report shows prices dipping below the previous forecast in 2024, and going below £100/MWh from 2026 onwards, with a low of below £80/MWh in summer 2029.

The conflict in the Ukraine has speeded up renewables investment across Europe, with millions more allocated to the transition. The higher levels of renewables deployment coincides with interconnectors coming online, smoothing out the transfer of energy. The increasing competition for GB renewables is forecast to reduce prices in the second half of the 2020s.

Tom Edwards, senior modeller at Cornwall Insight, commented: “With many of the headlines rightly focused on the short-term prospects for energy prices, it is often difficult to see the long-term picture. Our new data, forecasting a dip in power prices from 2024 up to 2030, shows that markets and governments are responding to the current higher prices with new investment in renewables to shore up energy supplies.

“The reduction in gas flow from Russia into Europe has led to a revaluation of energy supply and security throughout the continent. With much of what was their main source of energy now unavailable, countries are looking to the alternatives that will help keep the lights on over the next few years, and renewables fit this bill. Our data shows the benefits to the market of a growth in renewable investment, with the increasing competition for GB renewables reducing prices and helping stabilise the energy market over the next few years.

"It is hoped the savings will be passed on to consumers; assuming [the] price cap methodology remains in place, the reduction in wholesale power prices should be reflected in the maximum tariffs’ suppliers can set.  

“[But] we need to recognise that prices are forecast to remain above pre-2021 average until 2030. It is important that the UK and others maintain the course on low carbon generation, which alongside other measures to increase energy security such as additional nuclear or diverse gas imports, will be one of the key players in this journey.”   

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