The golden age of cheap energy is over

The head of one of the UK’s biggest energy suppliers today stoked concerns over higher utility bills saying that the age of cheap energy was over.

Speaking at the launch of his company’s energy manifesto, Paul Golby, chief executive of Powergen owner E.ON UK, said consumers’ bills would continue to rise as the power industry faced higher wholesale prices and costs of up to £100 billion to build new power stations.

“We’ve finished the period of cheap energy,” Dr Golby said, although he refused to comment on potential price rises later this year.

City analysts expect energy companies to increase consumer prices by around 15 to 25 per cent in September to maintain profit margins as input costs, such as coal, gas and oil, continue to rise. Many energy companies are now running their supply businesses at a loss because of higher costs.

“Wholesale prices have gone up considerably more than retail prices, so there will be upward pressure on bills,” Dr Golby said, adding that he could not see why coal, gas, or oil prices would go down in the near future.

Higher costs for the industry come as it faces pressure to rebuild almost a third of the UK’s ageing generating capacity while meeting the demands of the green lobby.

Dr Golby said the cost of replacing infrastructure would be in the region of £50 billion to £100 billion and that government targets for renewable energy were “extremely challenging.”

He said the industry was not looking for subsidies to help achieve green targets but that there needed to be a more open and honest debate to agree policy and action plans. “We’re running out of time, there has to come a time when consultations stop,” he said.

Dr Golby added that the country faced an “unprecedented” challenge in regards to power generation new builds and that capacity would need to increase to 120GW by 2020, up from today’s 76GW.

Part of the capacity increase, he said, would have to come in the form of back-up power stations to cover new green generation, such as wind farms, as output was currently unreliable.

He added that nuclear power plants would be the most important power source in future and that the company was keen to build new stations, although he refused to comment on any potential bid for British Energy.

Source - The Times