Stay updated with free updates
just sign up uk energy myFT Digest – delivered straight to your inbox.
Centrica’s chief executive has warned that British electricity prices in 2030 will be higher than they were after Russia’s full-scale invasion of Ukraine, as the need for more investment drives up costs in the energy system.
Chris O’Shea told a conference in London on Tuesday that Britain’s electricity system has suffered from years of underinvestment and is trying to catch up at a time when the cost of new equipment has soared.
“We have underinvested in this system for many years, and whether it’s the cost of building new gas-fired power stations or new wind farms, the costs have gone up,” he said at an International Energy Week event organized by the Energy Institute.
“Our projections show that the UK energy system will be one where, by 2030, the price of electricity was at the peak of the Russian invasion of Ukraine,” the head of a UK energy provider said during a panel event.
“One-third of that electricity cost will be wholesale cost and the other two-thirds will be system cost.”
The rise in the price of gas following the full-scale invasion of Ukraine caused the cost of wholesale and retail electricity to rise sharply – used to generate about a third of Britain’s electricity – as European countries were forced to diversify supplies from Russia.
The situation was worsened by disruptions at France’s nuclear power stations, which export electricity to Britain and other parts of Europe.
The UK government finally had to step in as early as 2023, and offered assistance to all households to pay their electricity bills. Prices have since declined, although they remain higher than the pre-crisis average.
The prospect of years of price rises could cause concern among ministers who have pledged to reduce electricity bills by 2030 after widespread concern about the pressure it would put on both households and businesses.
Britain’s gas and electricity infrastructure owners are to invest billions of pounds over the next several years to strengthen networks and build new power cables and pylons to transport electricity from wind farms around Scotland.
FTSE 100-listed Centrica, which owns domestic supplier British Gas, is investing in areas such as nuclear power and striking long-term gas import deals in an effort to boost the UK’s energy security.
“We have … an antiquated system and the rate of investment is probably not where it should be,” O’Shea said. “That’s why we’ve got such big packages from companies to upgrade the systems, and that’s driving up costs.”
