Analysts are predicting the energy price cap could soon surge to £1,973 a year for many and now a fresh call has been issued on heat pumps
Experts have sounded an alarm over heat pumps. It follows a concerning prediction about inflation risks threatening the UK.
The warning comes in the wake of a forecast suggesting household energy bills could rise by £332 annually from July. The fear is thatrecent sharp rises in wholesale prices are expected to impact Ofgem’s price cap, according to the latest projections.
Analysts at Cornwall Insight revealed this week that predictions for the regulator’s price cap from July to September had soared to £1,973 annually for typical dual fuel households – a hike of £332 or 20% on April’s cap. This represents a significant leap from its forecast just over a fortnight ago, when it had anticipated a 10% increase from July, and comes as chancellor Rachel Reeves hopes to keep inflation and interest rates low as Sir Keir Starmer’s government fights to lift economic growth in the UK.
Jess Ralston, Head of Energy at the Energy and Climate Intelligence Unit (ECIU), has now commented on Cornwall Insight’s most recent prediction for Ofgem’s July price cap, which could see a rise of over £300 from April’s cap.
She said: “Predictions of energy bills rising by hundreds of pounds will feel like deja vu to hard working families as yet another gas price crisis pushes up the cost of living. Many are still saddled with debt from the last gas crisis while Putin and the oil and gas companies stand to benefit.
“These wars and the global gas market are clearly beyond the UK’s control so the only way we have to permanently stabilise bills is to cut our use of gas and that means switching to electric heat pumps and renewables that squeeze gas power plants off the grid. The North Sea is in long term decline and more drilling won’t move the needle on prices we pay. Last year more renewables coming onto the grid pushed down the wholesale electricity prices by a third.”
War in Iran and its effect on energy bills in the UK
Cornwall Insight are updating their forecasts every week while the US-Israel war with Iran escalates and the energy market remains volatile. Cornwall said household energy bills over the summer appear set to be higher than it had anticipated before the escalation of conflict in the Middle East, which has sent wholesale gas and oil prices climbing.
Even if wholesale prices quickly return to pre-conflict levels, some of the recent volatility will be baked into the next price cap, which covers July to September, Cornwall said. Yet the figure is likely to change and the size of the increase to the next price cap will depend on how long gas prices remained elevated and how long the period of disruption continues.
Ofgem’s price cap is based on average wholesale prices over a three-month period. A spokesman for the Government’s Department for Energy Security and Net Zero said Cornwall’s forecasts are “highly speculative”, noting: “Using wholesale price fluctuations to predict what will happen in the next few months is not reliable.
“Tackling the affordability crisis is the Government’s number one priority. That is why we are acting to bring bills down now and for the long term.” The price most households pay for energy will fall by 7% from April 1, or £117 a year. But gas prices have been on the rise in recent weeks, and this could impact future electricity prices and the cost of heating homes.
On Thursday, UK natural gas prices hit a three-year high after surging by approximately 25% during the day. Prices had slightly fallen back by Friday.
