UK energy supplies are on a "roller-coaster" and heading "downhill fast" as power plants close and the demand for imported gas rises, energy watchdog Ofgem has warned.
Ofgem chief executive Alistair Buchanan said consumers and businesses can expect higher electricity bills as oil and coal fired power stations come offline "earlier than expected" to meet environmental targets.
Writing in the Daily Telegraph, Buchanan said, "We have to face the likelihood that avoiding power shortages will also carry a price."
The UK is set to rely increasingly on gas supplies, but costs for the resources are rising and foreign supplies are shrinking.
Russia is expected to cancel supplies from its Shtokman field while demands from China, where gas prices are 60% high than in the UK, are growing at 20% per year.
"Just when we need more gas, world demand for gas is set to tighten," said Buchanan.
Dr Simon Harrison, chair of the Institution of Engineering and Technology's Energy Policy Panel, said the UK has little choice but to rely on gas in the short-term.
"Other options such as new nuclear are some time from being available, and renewables in the UK are mostly relatively costly at present, although the industry is confident it can reduce prices if it can see visibility of large scale orders. A stable policy regime and confidence around decarbonisation targets is required to bring this investment forward," said Harrison.
"In the longer term we need to take care to look at the energy system as a whole, maximising the opportunities to use less energy, and balancing use of the full range of low carbon energy sources to give us a clean energy system without vulnerability to price shocks. But doing so will not be cheap."
Image: UK demand for gas is rising as prices increase. Photo courtesy of FreeDigitalPhotos.net.