National Grid’s high case scenario says the price of electricity could double over the next 20 years (Report, 10 July), which it could. But then again, it could halve. Predicting the future is more likely to be wrong than right. What we do know from evidence is that where there is a large percentages of electricity supplied from variable power sources (ie primarily wind and solar), peak electricity prices – the most expensive ones during the day and where companies make their profits – are falling rapidly, thereby bringing down the wholesale cost of electricity.
We also know from evidence that bills are as low as they can be in an energy system where real efforts are made to reduce total energy demand and improve energy efficiency. Neither of these strategies are being followed with any conviction in Britain.
On the other hand, again from evidence, the California electricity crisis of 2001 occurred because the economic justification for all the changes undertaken relied on wholesale prices coming down, and many analyses showed that they would. In the event, wholesale prices went up and led to a $40-45bn bill for customers. Now with Britain’s electricity market reform, the costs to consumers of its strategy can only be justified if wholesale prices go up – and sure enough we are seeing reports showing that this will happen. Evidence, plus many other reports, dispute this. Evidence is stronger and more robust than predictions. Thus, were policy in Britain to change, and if customer concerns and their bills started to become the primary goal of energy policy in this country, then I would predict falling wholesale prices and an uncomfortable time for the incumbents – including National Grid.
This Letter appeared on the Guardian website on 14th July 2014: http://www.theguardian.com/environment/2014/jul/14/predicting-price-of-electricity-uncertain