DECC cuts 2019 fossil fuel price projections by over 20%

Much of the UK government's case for backing renewables comes from the view that it will save money in the longer term as fossil fuels become more expensive. The arguments for increasing prices for gas, oil and coal have become frayed in recent months. Coal demand has stabilised as China begins its long awaited move to use smaller volumes of imported fuel and to switch to less polluting forms of power generation. The need for oil has been compressed by falling world economic growth and gas is being undermined by increased supplies. Governments tend to be reluctant to adjust price forecasts. It might undermine investment incentive. To react too soon to market trends can suggest insecure feelings about the quality of the forecasts.

DECC bought out new numbers today. Understandably, given the scale of the change, there was no accompanying text. Just a small Excel worksheet giving the forecasts for the three main fuels. A quick look at the table doesn't suggest much has changed. The numbers for 2035 are similar to the figures produced a year ago.

It's five years out that the real differences appear. Coal prices in 2019 are expected to be 23% lower than they were forecast this time last year. Gas and oil are both 21% down. Given that DECC issued 17 press releases today, the lack of media attention isn't surprising. Nevertheless, these are really substantial changes in the medium term outlook. And they add yet another dimension of uncertainty for investors in renewable technologies.