Green Subsidies Face Squeeze As Power Prices Forecast Looks Dodgy
Ratings agency Moody’s becomes the latest expert voice to question the Government’s forecast of rising power prices
Wholesale power prices are likely to stay at recent low levels for the rest of the decade, ratings agency Moody’s has forecast, in the latest sign that the Government’s green subsidy budget may be exhausted sooner than planned.
Ministers have forecast that wholesale power prices will rise to £63 per megawatt-hour (MWh) in 2020, driven by a looming crunch in spare power capacity and increasing gas prices.
But in a report on Wednesday, Moody’s said: “Our view is that power prices will stay around current levels, or £48-53/MWh through the end of the decade.”
If power prices do not rise as Department of Energy and Climate Change (DECC) has forecast, more subsidy will have to be paid to each green energy project, using up the Government’s finite budget sooner and so placing other projects at risk.
Scott Phillips, senior analyst at Moody’s, said he believed that the capacity crunch would be “short-lived” and that “energy-efficiency gains, the roll-out of offshore wind power and the return of mothballed gas plants will keep prices in check”.
The forecast could be good news for consumers as it would lead to retail prices increasing “less steeply” than feared, Mr Phillips said, although tariffs would still increase overall, “driven by renewable subsidies [and] network investments”.