Recent analysis from the UK Energy Research Centre (UKERC) has concluded that soaring gas prices – not environmental policies – are the main reason UK household electricity bills remain elevated.
Gas Accounts for Majority of Bill Increases
According to UKERC’s latest energy policy review, annual electricity bills have increased by £166 since 2021. Around two-thirds of this rise is directly linked to higher wholesale gas prices.
This challenges ongoing political and media narratives that have attributed higher energy costs primarily to green levies and climate policies.
Carbon Brief have reported that although policy costs are frequently blamed, the data indicates otherwise. The analysis shows that volatility in gas markets – and the UK’s continued reliance on gas for electricity pricing – has been the dominant factor driving up costs in real terms.
Gas Still Sets Electricity Prices Most of the Time
The report highlights a structural issue within the UK electricity market: gas fired power stations continue to determine wholesale electricity prices the majority of the time. In 2025, wholesale gas prices around 90% of the time. However, as additional renewable capacity comes online, that figure is forecast to fall to roughly 60% by 2029.
This shift is significant because reducing the frequency with which gas sets the market price would help insulate electricity costs from international gas price volatility.
Renewables Could Lower Wholesale Prices
UKERC’s modelling suggests that renewable energy projects scheduled to become operational between now and 2029 could reduce wholesale electricity prices by approximately 8% from current levels.
The organisation has recommended that the government reinforce this downward trajectory by transitioning older renewable assets onto fixed price Contracts for Difference (CfD) arrangements. Doing so would provide greater pricing stability and reduce exposure to fossil fuel linked pricing mechanisms.
Network Charges and Policy Costs
While gas prices account for the majority of bill increases, the analysis identified rising network charges as the second largest contributor since 2021. Continued grid investment – necessary to support decarbonisation and electrification – may place additional pressure on bills in the short term.
Policy related costs, often the focus of criticism, were found to represent only 12% of the overall increase for a typical household, making them the third largest contributing factor.
Take Control of Your Energy Costs with Solar
With wholesale electricity prices still heavily influenced by volatile gas markets, businesses and homeowners are increasingly turning to solar to protect themselves from future price shocks. Installing a solar PV system allows you to generate your own electricity, reducing reliance on expensive grid power and lowering long term energy expenditure. When combined with battery storage, you can maximise self-consumption and further reduce exposure to peak rate pricing.
If you’re looking to stabilise your energy costs contact SolarTherm UK today for a free, no obligation quote and design, tailored to your property, usage and future energy needs. No hard sell, just honest, expert advice – and the time you need to make an informed decision.
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