Protect Against Energy Price Rises

Ofgem, the organization in charge of regulating the energy industry and calculating the spare capacity of the power system currently in place, has announced grim news. In October of 2012, its first announcement set the risk of blackouts in the UK at 1 in 12, and an updated report in June of 2013 raised the risk to 1 in 4. With a 25% chance of blackouts now facing UK households, the energy secretary has announced measures designed to compensate large businesses for energy conservation.

The blackout risk is calculated for the 2015-2016 winter, and is based on the power capacity and supply. There is supposed to be a margin between the current power supply and the demand for power in case of excessive demand during cold days, for example, but the margin could fall to as low as 2% with the closures of power plants nationwide.

Power prices for consumers are at risk.
Households should be concerned about the threat to the supply of power nationwide. With tight margins, wholesale prices will likely increase. The measures taken by the government may result in consumer protection, as they are intended to, but they may not fully protect you from price rises. As a result, every consumer should compare energy tariffs in their area and see whether they can get a better deal now and at some time in the future. Performing monthly price checks over the next six months is not a bad idea, especially if you notice that your energy price is fluctuating more than usual.

Transition to green energy is causing the shortage.
The pressure on oil and gas plants to close and be replaced with nuclear plants or wind farms – both more green and environmentally-friendly energy solutions in the long run – is in part responsible for this shortage. This transition should have happened more smoothly, but Britain has forced the old plants to close a little too soon. New energy plants have not yet been built or opened to provide the energy currently in shortfall.

Forecasts require heroic efforts to reduce demand.
If the National Grid forecast is accurate, the risk of blackouts could fall once again to 1 in 12, but right now, the measures recommended seem “heroic” according to industry sources. Households need to reduce their energy usage by becoming more energy efficient, big businesses need to sign up for compensation in exchange for reduced peak time energy usage, and more.

Businesses will be responsible for reducing electricity use.
It seems sensible for businesses to compare energy prices, too, and try to remain on the cheap side of the supply. This isn't all businesses should do, however. One proposal by National Grid involves paying factories and large businesses to reduce their demand for electricity during times of peak demand, namely winter weekday evenings from 4 to 8 PM. However, this could cost companies millions of pounds, so a large cash incentive will be necessary to encourage this behaviour.

Solutions for consumers are mixed: reducing demand and switching to alternative energy.
Since it is difficult to harness wind power in your own yard and solar energy is not practical throughout much of the UK, the solutions as far as switching to alternative energy for consumers are limited. It may be worth investigating whether you would receive suitable sunlight to justify a solar-powered hot water heater or even solar panels to help supplement the energy demand from your household. Otherwise, reducing your energy usage through the Green Deal programme and small home improvements is a sensible idea that will both reduce demand and reduce your own bills.

Switching energy is the best way to save money immediately.
If your tariff is too high, the easiest way of immediately saving money is to compare energy suppliers that are available in your area. Check to see whether you are eligible for initial signup, dual energy, seniors', or other types of discounts. You may be able to reduce your personal cost of energy if your current supplier raises rates in anticipation of higher demand and you can find a supplier with less of a tendency to change rates.

It's difficult to predict with any certainty right now how the winter of 2015-2016 will unfold. It appears that there will be an energy shortage, but if the government and large businesses take sufficient action before this date, we may avoid the looming risk of blackouts and energy shortfalls during the winter.


Homeowners Guide to Energy Efficiency