An average UK utility bill could rise to £3,150 from £1,200 last year due to the ramifications of the Ukraine war, according to Barclays.
Analysts at the bank made the grim forecast after assessing the implications for European energy supplies and also the cost of finding alternative sources of supply to Russia.
Barclays says Russia’s invasion of Ukraine has highlighted the failure of European energy policy to provide for security of supply and diversity of energy policy and in the short-term, at least, that is going to cost.
Europe imported around 35% of all its gas needs from Russia in 2020 and 20% of its coal.
Alternatives are limited suggests the bank and limited to sourcing elsewhere, switching back to coal and restrictions on use.
”Companies with power generation exposure could see significant EPS upside as power prices spike,” said the note, though this might be socially unacceptable and prompt measures to claw back the windfall.
A tax has already been proposed by the European Commission and if UK bills soar as high as Barclays suggests, it sees the possibility here as well.
Barclays estimates that it might take between 5-8 years to find alternatives such as LNG plants and large-scale renewables and as a consequence it expects oil and gas prices to be 'higher for longer'.
Long-term, Barclays sees the switch from coal to renewables being doubled-down, with nuclear to the fore.
“In some European countries (UK, France, Eastern Europe) we see nuclear energy becoming a choice of energy.”
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Barclays' conclusion is that there will be material upgrades for power generators in the foreseeable future, though there is a small tail-risk for some if contracted gas is turned off.
"We see a reduction on the reliance on Russia as a permanent feature of European utility policy, regardless of the Ukraine outcome. Primary energy producers and renewable developers are likely beneficiaries."
British Gas owner Centrica PLC (LSE:CNA) is one of the bank’s preferred stocks with a price target of 112p and an 'overweight' recommendation.
Shares today were up 2% at 76.1p.