Predicting patterns in energy prices can be tricky. Depending on how the economy is performing, the type of energy you’re using, and your location, prices are likely to fluctuate.
But if there’s one thing we can be sure of, it’s that the cost of energy is increasing dramatically. This cost incline is mainly down to our progressive march towards the inevitable end of fossil fuels – and our time’s nearly up.
But what lies ahead for UK household energy? In this article, we’ll cover any questions racing through your mind, from energy price forecasts, to analysing how solar energy could help you dodge this wallet-straining situation.
If you’ve got a head-start on your solar research, you’ll know that solar energy could swoop in to save the day. So, instead of scrolling through the market to find your perfect solar panel system, tell us a little about your home and our professional installers will provide you with free quotes.
What’s on this page?
Are energy prices rising?
Energy prices have been rising for decades now. Though you might not see a huge difference over a couple of years, this snapshot of the past decade proves how much prices have risen:
Data from Statista
Over the past 10 years, the price of electricity per kilowatt-hour has jumped from 12p to 19p. Though this might not sound a lot, it mounts up quickly – especially since we’re constantly using electricity to charge our devices, power our homes, and even run some of our cars.
To give you a little perspective on how much energy we’re consuming in the UK, take a look at the UK’s overall electricity consumption from 1970-2018:
As you can see, our consumption rate has sky-rocketed. In fact, according to Statista, in 1970 the overall expenditure on electricity in the UK was £1.5 billion, which has since soared to nearly £38 billion by 2018.
Thankfully, we’re seeing a slight dip in consumption in recent years, with the peak (so far) being in 2005. Though we can’t guarantee why energy consumption peaked in 2005, it’s possible that awareness of climate change became more prominent around this time – leading to more conscious consumption.
Will prices continue to rise?
Unfortunately, yes. In fact, we’ve worked out that electricity bills should double within the next 20 years.
We’ve taken government figures on the average annual domestic electricity bill (3,800kWh/year),
and used them to predict what you can expect to be paying in the next couple of decades:
As you can see, these energy price forecasts paint quite a bleak picture for the next 20 years. Though there are a handful of reasons why UK energy is costing us more money, it’s mainly down to the finite amount of fossil fuels left in the world – but more on this later.
Methodology for our forecast
We worked out what the average household actually spends on grid electricity each year. Using three different sources (Ofgem, OVOEnergy, and Statista), we calculated the average annual cost of electricity bills in the UK between 2004 and 2019.
This then allowed us to work out the Compound Annual Growth Rate (CAGR) of UK electricity bills, which is 3.73%. Combining this with median household disposable income, we created a 20-year forecast for UK electricity bill costs.
How can you avoid these sky-high prices?
Renewable energy can wash away your financial woes. And over the next few years, most of us will become much more familiar with green technology, thanks to the government’s goal to hit net-zero emissions by 2050.
As more people lean towards solar, wind, and hydropower to power their needs, green energy should become cheaper. Fossil fuels, on the other hand, will continue to drain your bank account. The EIA forecasts that by 2025, a barrel of crude oil will cost £62.90 – and by 2050, it will soar to £169.
So, instead of settling for overcharged fossil fuel tariffs from the Big Six, look into renewable energy suppliers. The list of green energy suppliers in the UK continues to grow as renewables become more popular, but our top picks are Bulb, Octopus Energy, and Green Energy UK.
With these tariffs, you can expect 100% renewable energy, affordable prices, and top-quality customer service.
But are there any other options out there? The answer lies in the next section.
Can solar panels help you save on energy bills?
An even more effective way to swerve this energy-bill incline is to invest in a trusty solar panel system. We know it’s a lot of money to pay on the offset, but with the financial forecast looking rather gloomy, you’ll be thanking yourself in 10-15 years time.
So, how much can you save with solar panels over the next 20 years?
Though you’re most likely to break-even by 2037, which may seem like a tiny dot on the horizon, your solar panels will reward you with thousands of pounds in savings in the following years. Whilst other households settle for rising energy prices, you’ll be saving more as the years go by. We’re in it for the long run.
Plus, you’re doing your bit for the environment, so Planet Earth wins too!
What is the energy price cap?
The ever-growing cost of energy has meant that measures need to be put in place to ensure prices are still affordable for vulnerable households. The energy price cap is a government policy, designed to protect the vulnerable and those who have stayed loyal to their energy supplier.
Ofgem, a government energy regulator, sets a cap on the unit price of energy for electricity and gas, along with a maximum standing charge. This means that energy companies are unable to charge tariffs higher than these thresholds.
Will the energy cap affect you?
The energy price cap will only apply to you if your tariff is on a prepayment meter, or if you’re on a ‘standard variable' energy tariff.
Though this cap is put in place to help the vulnerable, in April 2019, Ofgem raised the energy cap – leading to some UK households paying an extra £117 a year. So, these don’t always end up saving you money, and if you found yourself putting more money aside for bills last year, this might be why.
2019 energy price rises
Ofgem price cap
What is increasing the price of energy?
There is a high demand for the finite supply of fossil fuels on our planet. The longer this goes on, the shorter supply we’ll have of oil, coal, and gas, leading to only one thing: painfully expensive bills.
But how long will it take for us to reach the end of fossil fuels – 100 years? 200 years? The harsh reality is that it’s just around the corner.
Data from Our World in Data
Within the next 50 years, the energy industry will have no choice but to invest in renewables. The closer we get to the end of our supply, the higher the prices will be pushed. On top of this, we will also have to leave between 65-80% of current known reserves untouched if we are to stand a chance of keeping average global temperature rise below the two-degrees global target.
Since the end of March, the majority of the UK population has spent day after day confined to the four walls of their homes. Lockdown has meant that some UK households are facing a 37% increase in energy bills, mounting up an extra £32 per month. This is mainly down to our increased home-energy consumption: more screen time, more device-charging, more cooking, and (especially if you’re working from home) many more cups of tea.
On the flip side, energy suppliers across the UK are also offering support for millions of vulnerable households. So, depending on your financial stability, you may see an increase in energy expenses, or you might be part of the 4 million households receiving support during the coronavirus pandemic.
Once we stumble over the coronavirus hurdle, it’s time for us to attempt the next one: Brexit. And you might want to brace your purse strings in preparation for it, as energy bills are set to increase, yet again.
If you’ve kept up with all-things-Brexit over the past few years, you’ll know that it’s predicted to knock the UK economy quite a bit. Around 12% of gas and 5% of the UK’s electricity comes from the EU, so without an effective trade deal put in place, it’s likely that energy will become pricier towards the end of 2020.
According to Which?, if we land a no-deal Brexit, an old set-up for trading electricity could be used instead of creating something new – but this could be slightly less efficient and would increase prices by around £200 million by the mid-2020s.
What’s the verdict?
There’s no denying it: energy prices are on the rise and show no sign of plateauing. In just 20 years, we could see our energy bills double from what they are today – but can we afford this?
Rather than waiting until 2050 to change your energy habits, you can nip it in the bud now and invest in solar panels. You’ll save more on monthly energy bills, and you’ll be contributing to a more eco-friendly planet – it’s a win-win.
We know that buying a solar panel system can seem intimidating – so let us take the reins from here. We’ll ask you a few questions about your home, and our professional installers will pair your house with the perfect solar panel system. Soon enough, the rising energy prices will be a thing of the past for you!