Consumers face further price increases if the pound falls further, says Pure Planet
Brexit has had a “massive bearing” on UK energy bills and consumers face further price rises if the pound falls further, according to a BP-backed energy startup.
Steven Day, a co-founder of Pure Planet, an app-based renewable energy supplier, warned that the UK’s departure from the EU was the biggest political issue facing the energy sector at the moment.
“The very short-term stuff is the fog of Brexit. That is causing a major problem in terms of what costs consumers will face in 2019. If the pound gets devalued further, energy prices will go up again. That is unequivocal,” he said.
The UK only imports a small amount of electricity, around 6% of supplies, but imports more than half its gas, meaning the country pays more for the fuel when sterling weakens. The pound has repeatedly fallen at signs that a no-deal Brexit is more likely.
Day, a former telecoms executive, said there was “no doubt” the pound’s devaluation was a key factor behind a series of price increases that have hit millions of households this year, as suppliers blamed rising wholesale prices.
Further increases in wholesale costs were likely, he said, which would prove a challenge for the government’s price cap that takes effect at the end of the year.
The co-founder said the market was very different from when he launched his green energy supplier a year ago because the cost of energy was now a “big barrier” for anyone considering joining the market’s 60-plus suppliers.
“The days of the independent sector expanding are over, at least temporarily, while the market consolidates a little bit,” he said.
Day said he was concerned that an exemption in the price cap, which allows green tariffs to breach the limit, could hold back the UK’s switch to renewables.
It is not yet clear if any firms will apply for the exemption but if they did it could affect the perception of green energy, he suggested. “It reinforces the idea that green has to be more expensive … and that will slow down the shift to green energy.”
BP holds a 24% stake in Pure Planet, which is on track to hit more than 75,000 customers by the end of the year.