Energy price cap analysis: gas adding 7x more to bills than renewables
Analysis of the new energy bill price cap shows seven times the cost of schemes that support renewables
By Jess Ralston
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Analysis of the new energy bill price cap announced earlier this week [1] from the Energy and Climate Intelligence Unit (ECIU) has found that while the financial support for renewables via bills has on average been the same during the energy crisis as in the years before, wholesale costs driven up by gas prices will have added £3,000 by the end by this autumn. This will be four years into the ongoing gas crisis and is equivalent to an average of £750 a year per household. [2]
This is more than seven times the cost of schemes that support renewables, with newer fixed-price wind farms (under Contracts for Difference agreements) subsidising bills when wholesale prices are high, and the costs of older schemes (RO and FiTs) set to fall from this year onwards. [3]
Of the £3,000 increase, the majority, £1,800, comes from higher gas bills. The effect on electricity bills is smaller because, whilst gas prices have pushed up wholesale power prices, renewables are helping to reduce the UK’s reliance on gas power plants.
The price of gas recently spiked at a two-year high [4] and while the price cap could fall later this year it is currently to rise again after that [5], underlining that the volatility is set to continue.
Commenting on the analysis, Jess Ralston, Energy Analyst at the ECIU, said:
“Let’s be very clear on this, it is gas that has been driving up energy bills over the past four years and it continues to do just that. Families are struggling because the UK is heavily reliant on gas for both electricity generation and home heating, and the price of gas is volatile.
“Investing in British renewables will stabilise prices and replacing gas boilers with heat pumps will shield households from these price swings. The world is an unpredictable place and energy security is national security so switching to homegrown electricity leaves us less vulnerable to the whims of actors like Putin.”
The Energy Crisis Commission, made up of representatives from the energy industry, business and consumer groups, last year found that the UK remains “dangerously underprepared” for another gas crisis because of its reliance on gas for 30-40% of its power generation and 85% of home heating. The Commission recommended continuing to build out renewables and fitting more insulation and heat pumps to reduce gas demand, as well as reforming the energy market so that gas no longer sets the price for all electricity. [6]
1. Ofgem announced the price cap for Q2 2025 on 25 February: https://www.ofgem.gov.uk/energy-price-cap
2. The analysis calculated components of gas and electricity bills for each quarter of the year using: breakdown of standing charges and unit rates from Ofgem’s price cap model, particularly wholesale costs and renewables levies (RO, FiTs and CfDs – the latter moving from levies to wholesale costs in mid-2022); quarterly percentage demand splits based on historical averages of data from ET 4.1 and ET 5.1 issued by DESNZ; and Typical Domestic Consumption Values (TDCVs) from Ofgem. Costs were summed up for the four years (Q4 2017 to Q3 2021, inclusive) immediately before household prices started rising due to the gas crisis. Costs were also summed for the gas crisis: Q4 2021 to Q2 2025 using data from Ofgem’s price cap models; and Q3 2025 using forecasts by Cornwall Insight issued on 25 February 2025, and the rise in unit rates was attributed to wholesale costs. This allowed a comparison of 4yrs of pre-crisis costs vs 4yrs of likely costs during the crisis. Renewables (sum of RO, FiTs and CfDs) cost just over £100 per year on average in both periods i.e. they have been level on average. Wholesale costs on gas and electricity bills together cost c.£400 per year before the gas crisis, and are set to cost almost £1,200 per year on average during the crisis, i.e. higher by c£.800 per year or £3,100 over 4yrs (does not sum due to rounding, and rounded down further to £3,000 in this release out of an abundance of caution). All values are total costs a household with typical levels of demand; the majority of costs were paid by households via their bills, but Government paid part via support schemes in 2022 and into 2023.
3. For projections of falling costs of RO and FiTs, see Figure 7 of The UK’s clean power mission: Delivering the prize (E3G, 2025): https://www.e3g.org/publications/the-uks-clean-power-mission-delivering-the-prize/
4. In early February, gas prices in the UK reached a two-year high, but remain volatile despite having since fallen from these levels: https://eciu.net/media/press-releases/2025/gas-prices-reach-two-year-high-in-run-up-to-anniversary-of-ukraine-invasion
5. Cornwall Insight estimates for 2025 (issued Feb 2025): https://www.cornwall-insight.com/press-and-media/press-release/cornwall-insight-release-final-april-price-cap-forecast/
6. The Energy Crisis Commission: https://energycrisiscommission.uk/
For more information or for interview requests:
George Smeeton, Head of Communications, ECIU, Tel: 07894 571 153, email: george.smeeton@eciu.net