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EV and HHP deployment forecast to reduce electricity costs

Stuart Leaver Analyst

A report published in April by Vivid Economics and Imperial College London, Accelerated Electrification and the GB Electricity System, has forecast that rapid electrification of vehicles (EVs) and accelerated installation of hybrid heat pumps (HHPs) could lower average wholesale electricity costs by up to 7%. Figure 1 shows the forecast average cost of electricity for 2025-2035, with the introduction of low carbon technologies expecting to lower this to under £100/MWh. In the Rapid EV scenario, the average cost of electricity is £97/MWh, around 3% lower than in the Central scenario cost of £100/MWh for 2035. The Rapid HHP scenario displays a lower cost of electricity, at £95/MWh, a 6% reduction, and a combination of both Rapid EV+HHP reduces the cost even further to £93/MWh. However, the combination of both Rapid EV and HHP could be more expensive in terms of infrastructure, meaning that a single technology approach could be more attractive for the expected returns in lower electricity costs. The rapid expansion of HHP development is therefore believed to be more beneficial. The reduction in electricity costs is driven by the falling cost of renewable generation, as well as the limited impact of EVs and HHPs on peak GB demand if equipped with smart technology. Further analysis indicates that rapid EV deployment will increase peak demand by 7GW, whilst HHP would have negligible impact, with peak demand remaining at 77GW. Continued analysis would help support government policy to increase renewable penetration, provide flexibility and avoid unnecessary additional costs. Therefore, ...

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