Energy prices to soar as British reserves 'head downhill fast' warns watchdog boss

• Ofgem chief executive Alistair Buchanan issues big warning to consumers
• Power plants closing and foreign gas supplies are falling as demand rises
• Buchanan: 'It's likely that avoiding power shortages will also carry a price'

Energy supplies are on a 'rollercoaster' and heading 'downhill fast', a regulator warned again today.

Ofgem 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.

The energy regulator's chief executive Alistair Buchanan said: 'We have to face the likelihood that avoiding power shortages will also carry a price.'

He wrote in a newspaper: '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.'

Mr Buchanan also told the BBC: 'There is no new nuclear, no new clean coal, no new carbon capture this side of 2020.

'So we will lean on gas, and gas will account for about 60% of our power station needs instead of 30% today, and in order to get hold of that gas we're going to have to go shopping round the world.

'Just at the time we're tight on power stations, the world is going to go tight on LNG (liquefied natural gas) gas prices, so you have got a double squeeze.'

He said Ofgem would not let companies take advantage of consumers.

'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'

Ofgem chief executive Alistair Buchanan

'What I think the consumers are really concerned about is that companies take advantage of rising prices and rising investment periods and line their own pockets,' he said. 'We had a major set-to with the industry two years ago.

'I am very encouraged by what the industry is doing - they are paying their fines for behaving badly, they've stopped mis-selling, they are carrying forward a lot of retail market reforms.

'So, for the consumer the issue is "Are the companies taking advantage of a high-price environment?" And we will ensure they don't do that on behalf of consumers.'

Mr Buchanan also told BBC Radio 4's Today programme that he fears a 'near crisis' in energy for Britain, adding: 'We have to resolve leaky homes and we have to focus on energy efficiency.'

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

A spokesman for the Department of Energy and Climate Change 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.

'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 have legislated to introduce a capacity market that will help guard against blackouts and ensure there is sufficient supply when margins get tight'

Department of Energy and Climate Change spokesman

'We are opening up the electricity market to incentivise a record £110billion 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.'

Responding to Mr Buchanan's comments, Angela Knight, chief executive of Energy UK, the industry's trade body, said the authorities should 'get on with exploring the options for UK shale gas reserves to help energy security and focus on the affordability of energy to households and the competitiveness of British industry'.

Opponents of tapping into shale gas reserves claim it causes pollution and earthquakes and does not offer a viable long-term solution to the country's energy needs.
 

From MailOnline