Demand for the rest of the year and lower solar output will still keep energy firms in business

This article is more than 1 year old

This article is more than 1 year old

British summers could be entirely powered without fossil fuels by the middle of the century without breaking the economics of the energy market, according to a report.

But while wind, solar and nuclear power would provide nearly 91% of the country’s electricity by then, up from about 50% today, gas power stations are still expected to be needed during winters.

Analysts at Aurora Energy Research looked at how the wholesale power market would cope if the UK meets its target of slashing carbon emissions 80% by 2050.

They found that the price of power would drop to nearly zero between April and October because of lower demand and the glut of electricity coming from solar panels and windfarms.

But energy firms would still have a viable business model because the other half of the year prices would hit around £70 per megawatt hour, higher than today’s annual average of £50-60 per MWh.

“Reaching a high renewables scenario can deliver Great Britain’s climate change targets without breaking the wholesale market,” said Weijie Mak, a co-author of the report.

However, he said if the country adopted a tougher approach of reducing emissions to zero, as ministers recently asked experts to consider, that would break the market because prices would go too low for companies.

The report paints a picture of a world where the appetite for electricity has increased by two-thirds on today’s demand, because of the rise of electric cars and switching from gas boilers to electric heating.

But because of higher demand and lower solar output in winter, gas power plants would still be needed to fill in the gaps between November and February.

Their owners would need an additional payment during winter for being ready to provide backup power when needed, to make the economics work.

The explosive growth of renewables in the past eight years has already dampened power prices by about £4 per MWh. But Aurora said that effect could be as much as £40 per MWh by 2050.

Whether that translates through to a cut in energy bills remains to be seen, said Richard Howard, head of research at Aurora. While the wholesale part of a bill would certainly fall, other components such as backup power payments, renewables subsidies and network costs could rise.