So, why were the forecasts wrong? There are multiple reasons, but all linked to a common cause: a failure to predict higher bills and a failure to predict the scale of the response.

They missed the rise in grid defection due to rooftop solar, massively underestimated the uptake of energy efficiency measures, assumed a relationship between GDP growth and electricity use that didn’t hold, and crucially, they did not foresee a big drop in demand from industry. Industrial electricity consumption dropped by a third between 2005 and 2024. Some sectors like iron and steel saw electricity use fall by even more (75%).

It is hard to imagine the same response if electricity prices had not risen by over 100% in real terms for households and nearly 175% for industrial users over the last two decades. Part of the problem was that past demand forecasts were based on models that used wholesale fuel prices — the cost of gas and coal — as their price input. But wholesale costs are only part of what consumers actually pay. Network charges roughly doubled in real terms. Policy levies grew from almost nothing to around 25% of the bill.

Until 2014, policy costs were being tracked. The then-Department for Energy and Climate Change published semi-regular forecasts of the impact of policy on bills and prices. In its final 2014 report, DECC projected that policies would push up domestic electricity prices by around 37% by 2020 in the central scenario, and small business prices by around 50%. These forecasts weren't perfect — they excluded network integration costs for renewables (DECC explicitly acknowledged this gap) and assumed higher consumption than actually materialised. But they were at least a serious attempt to quantify what policy was doing to prices.

Frustratingly, the predictions weren’t factored into the demand forecasting model. After 2014, they stopped forecasting electricity prices. In 2017, the Climate Change Committee did produce a version, but it predicted bills not prices. This was a problem because big improvements in energy efficiency disguised the fact that electricity was getting increasingly expensive. Still, it was better than nothing. For the past eight years, the UK has been making major electricity policy decisions with no official forecast of what those decisions will do to the price of electricity.

And that was not the only problem, the forecasts of electricity demand also assumed that industry was much less responsive to electricity prices than they were in reality. In the short term, electricity demand is pretty inelastic to price. Households might run their tumble dryers a bit less to save money in response to a price hike, but they are limited in what they can do to cut back. Over time the picture changes. If you expect electricity prices to stay high for the next decade, then you start making real changes. You buy more energy efficient appliances, put solar panels on your roof, and if you rely on electric heating, invest in things like insulation. If you’re a business, high prices might deter you from investing in new energy-hungry kit. High prices may, of course, force you out of business altogether. The best academic estimates suggest that in the long-run electricity use is three times as responsive as it is in the short-term.