Centrica CEO Issues Stark Warning on UK Electricity Price Hikes by 2030
Chris O'Shea, the chief executive of Centrica, which owns British Gas, has made a significant prediction that UK electricity prices in 2030 will be higher than they were in 2022, following Russia's invasion of Ukraine. This forecast highlights a looming crisis for industry and economic growth, as all options for upgrading the country's energy infrastructure come with steep costs.
Underinvestment and Rising Costs Drive Price Increases
O'Shea emphasized that the prediction is not about net zero goals but stems from years of underinvestment in the energy system. He stated, "We've underinvested in the system for many years, and whether it's the cost of building a new gas-fired power station or a new windfarm, the costs have gone up." This reality is compounded by factors such as the high price of turbines for gas-fired plants and the expensive nature of nuclear projects like Hinkley Point C and Sizewell C.
Additionally, a massive £80 billion upgrade to the transmission grid by 2031 is underway, much of which is necessary regardless of energy sources. While recent offshore wind auctions have avoided extreme prices, contracts at £91 per megawatt hour for 20 years are not bargains compared to wholesale prices around £80.
Government Response and Industrial Impact
The government has acknowledged these challenges, shifting some costs to general taxation and offering discounts to energy-intensive industries. However, critics argue this falls short of a comprehensive strategy. A new scheme for 7,000 firms promises savings of up to 25% on electricity bills, but details remain vague, leaving businesses exposed to some of the world's highest industrial electricity prices.
Steve Elliott, chief executive of the Chemical Industries Association, warned of more site closures, citing energy costs up to four times higher than in competitor countries. He noted, "One of the biggest pressures on the sector has been the crippling cost of energy – needed to not only run factories but also as a feedstock, underpinning production processes." Broader issues include misaligned carbon taxes and unsustainable decarbonisation deadlines.
Long-Term Implications and Political Pressure
Most energy analysts agree that system-wide savings from renewable and nuclear investments may not materialize until around 2040, meaning prices could rise slightly in the coming years. This poses a threat to core industries like life sciences, defence, and advanced manufacturing, which are vital for economic growth.
Recent interventions, such as rescuing Scunthorpe's steelworks and funding Ineos's Grangemouth plant, have been last-minute efforts rather than part of a cohesive plan. With electricity prices expected to climb further by 2030, there is growing pressure on political leaders, particularly Labour, to develop effective solutions to safeguard competitiveness and support industry.
