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2020 and beyond: insight from COVID-19 and our long-term outlook for the GB power and European gas markets

Our following report was first presented during a group meeting in June 2020 and was subsequently updated to reflect feedback provided by clients.

Key messages to emerge from our analysis are:

  • As a consequence of COVID-19, the GB Power Market observed recent historic lows in gas prices, demand and power prices. Aurora Central forecasts that a full recovery would take place by 2025. The outbreak has also provided insights into potential system outcomes in a high renewables world​
  • Aurora Central forecasts a significant growth of renewables through a combination of merchant solar and onshore wind assets coupled with CfD-backed offshore wind. Despite this, power prices are expected to rise to an annual average of £63/MWh in the 2030s due to higher demand, gas and carbon prices
  • Driven by the uptake of electric vehicles and heat, annual power demand is expected to increase by 42% to 431 TWh by 2050. Further policy incentives will be required to encourage the uptake of heat. Reforms to VAT structures for heat or imposing a carbon price on domestic gas are likely to be most successful, increasing the uptake of electric heating units by more than 50% in 2035
  • Smart electric vehicles will lower baseload prices and spreads but improve renewables economics. On the other hand, the impact of smart heat is limited due to a relatively more rigid consumer preferences for heat at certain times in the day

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