It says Britain’s energy companies will need to invest £200bn in infrastructure to secure supply and meet carbon reduction targets in the next decade, forcing prices up.
As part of its “Project Discovery” report Ofgem has drawn up four energy scenarios to highlight the risks Britain’s utilities market faces in the next ten years, including renewable energy targets, aging power stations and an increasingly volatile global gas market.
In all four scenarios, consumers will see between 14 and 25% increases on domestic bills, with the possibility of a 60% rise if sales wholesale prices soar.
Ofgem chief executive Alistair Buchanan says: “Our scenarios suggest that Britain faces a tough challenge in maintaining secure supplies whilst at the same time meeting its climate change targets.”
The regulatory body will make several policy proposals to the industry next year to help it meet the challenges.