Budgeting for energy prices in 2020

Many people are having difficulty in paying their energy bills. Some estimates by independent sources claim that a quarter of the households are finding it hard to budget for the energy bills, although presumably these households are having problems in paying all their bills in these difficult times.

When it comes to budgeting to pay your energy bills the task is no different from budgeting for any other part of your household expenditure. You have to prioritise. Some things are more valuable and more important to you than others. Your priorities will depend upon your circumstances. If you are old and unwell heat is important to your well being. If you have children hot water is essential to the health of the household. Things like televisions and games machines can be expensive to run. Will you ration electricity use and buy good quality food or buy cheap food and use your electricity as before? That will probably be a choice for many.

Much has been made of the subsidies and energy taxes some of which are used for large scale renewables, such as offshore wind farms and very highly, probably over highly subsidised photovoltaic installations. These add to your energy bills, but they will not be the main factor in future energy costs. The laws of supply and demand will ultimately prove to be the largest source of increased energy costs. While energy supply is usually priced on a regional basis, fuel is priced on an international basis (except at the moment natural gas) and fuel prices rising as the developing nations use more and more fuel will force energy prices upwards.

What will be a bigger charge on household energy bills than renewables will be the need for the energy companies to replace old power stations, clean up dirty ones and build new nuclear power stations. These are infrastructure cost born by the previous generations but the infrastructure needs modernising and replacing now, and that is expensive.

The poor will find it hardest to cope. Some now in fuel poverty ration their energy to what they can afford. More and more people inEuropewill have to do this over the next few years, as energy becomes relatively expensive and takes a greater proportion of the household budget.

In the unlikely event of the UK meeting its Climate Change and renewable energy targets the energy prices will be driven higher, as at the moment renewables costs more than fossil fuel and uranium. However it is virtually certain that these targets will not be met over the medium term.

Many people who have studies energy are loathe to predict what the real energy costs will be in 2020 – just eight and a half years away. My prediction is that in real terms energy prices will be 60% higher than they are now, for gas, electricity and fuel oil, but I would not rule out a higher increase. 2020 will see more homes on this planet to warm and power, more people who wish to use energy all of whom will compete with existing users. I do not rule out a series of bad weather events that finally convinces governmets to act more forcefully on climate change. Overall, it is a gloomy prediction but I really can see no alternative.

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