The head of Ofgem has suggested that the UK could be facing shortages in electricity and gas in just three years, which could significantly push up the prices for household energy. This is despite UK households already paying near record pries for their energy at the moment.
Alistair Buchanan the chief executive of the regulator was speaking at a conference in Amsterdam this week and stated that the increase in prices could stem from the closure of UK coal-fired power stations which is expected to happen around 2015. These closures are in order to comply with EU laws regarding pollution.
Gas fired power stations will need to be built to replace coal, but gas is also becoming increasingly expensive. In addition, there is likely to be a delay in the building of wind farms and nuclear power stations in the nest three years.
One nuclear plant is expected to be built by 2017, but another has been delayed until 2019. However Buchanan feels that neither plant will be ready before 2020, making the UK ever reliant on gas.
Middle East unrest
He also points out that energy prices a dependent on outside issues such as Middle East unrest and North Sea oil maintenance issues. The UK relies heavily on liquid gas shipments from the Middle East and is competing with other countries, in particular Japan, which is starting to replace many of its nuclear power stations following the Fukushima disaster last year.