Energy bills set to reach £2,000 a year
Energy bills will skyrocket to unaffordable levels by 2015 unless the Government acts now, says a new report.
The Government may soon be completely in charge of the energy market in the UK, with far reaching changes needed to prevent energy bills skyrocketing to £2,000 a year, energy watchdog Ofgem has warned.
The regulator has concluded its Project Discovery report, with some shocking findings. Chief among them is the suggestion that unless the infrastructure behind the energy market is completely revamped, you and I will face energy costs spiralling out of control.
For many of us, gas and electricity will be simply unaffordable - and that could mean the lights going out across the country.
What's the problem?
Ofgem has highlighted a number of key issues which present a perfect storm of challenges to the UK energy market.
These include the fact that huge investment is required into the energy market - many of our power stations are nearing the end of the line and need replacing - at a time when finances are tight, while the pressures of hitting domestic and international carbon targets are also likely to force up prices.
In addition, our energy supplies are far from secure, with our reliance on energy from overseas.
All these factors combined present a massive problem in terms of providing us with energy at an affordable price - by 2015 energy bills may be beyond many of us, according to the report, and could come to as much as £2,000 a year for some.
What's more, Ofgem reckons the measures needed to fix it might cost an almighty £200bn.
The suggested solutions
This is the bit that is really interesting, and will have far reaching consequences not just on how much we pay in energy bills, but who that money goes to.
Ofgem has outlined a series of different possible solutions.
The most basic plan involves targeted reforms, consisting of setting a minimum carbon price (which Ofgem thinks will promote low carbon investment) and improving price signals, which would encourage suppliers to ensure they had access to back up supplies, particularly in times of high demand.
Should this prove unsuccessful, there are a series of additions to the plan that can be added, including further energy supply obligations on suppliers, and launching a tenders process for renewable energy to encourage private investment.
Here comes nationalisation...
The final plan is the most radical - if all of the other ideas don't work, Ofgem suggests having a 'central energy buyer', responsible for setting the amount and type of new energy needed, as well as organising tenders for the new infrastructure required.
In essence, it means state control of the energy market. We've already seen banks nationalised in the last few years - energy companies may very well be next.
What you can do
While that remains a long shot, the simple fact is that no matter what changes come into force, bills are only going one way: up.
Thankfully there are plenty of things you can do to ensure you are not hit too hard.
The first should be to adopt the Lower your household bills goal at lovemoney.com, which should give you plenty of ideas on how to keep your energy expenditure as low as possible.You could also use our online banking service to keep track of your energy bills, so you always know how much you're spending.
Nab a feed-in tariff
This week, the Government finally unveiled its plans for feed-in tariffs, and they should definitely be on your radar if you want to keep your energy expenditure as low as possible, over the long-term.
Basically, homeowners will be paid for generating their own power, through measures like rooftop windmills and solar panels.
And doing so could prove pretty lucrative - according to the Department for Energy and Climate Change, fitting a typical 2.5kW well sited solar pv installation could see the homeowner handed up to £900, as well as saving around £140 a year on their electricity bill.
In fact, any surplus energy created can then be sold on to the National Grid, earning you even more cash!
The Government is currently undergoing a consultation on the scheme - with some critics arguing the cash incentives should be even higher - before fully launching in April.
Get a better deal!
Millions of Brits languish each year on standard tariffs from their energy providers, shelling out hundreds of pounds more than they need to. It's utterly daft!
The key is to shop around for a tariff which really meets your needs, without breaking the bank.