Household energy costs up by £4,800 during ‘back-to-back’ energy crises

Across two gas crises, gas bills for a typical household are expected to be around £2,600 (over 100%) higher than in five years before the crisis, with electricity bills more than £2,200 (just under 75%) higher than before the crisis. Government support schemes in 2022 and 2023 (funded by taxation) paid around £1,400 of the extra costs, leaving a typical household paying an extra £3,400 directly on bills.

Wholesale gas costs and their VAT account directly for around £3,600 (75%) of the extra costs for a typical household over the five years, both directly on gas bills and also on electricity bills via gas power plants having high running costs and usually setting the wholesale price of electricity. 

Wholesale gas prices began rising in September 2021 and spiked sharply following Russia’s invasion of Ukraine in early 2022. While prices later eased, they never returned to pre‑crisis levels, keeping bills elevated. Now, the war in Iran has pushed gas prices up once again, recently hitting their highest level in three years [2]. 

Commenting on the analysis, Jess Ralston, Energy Analyst at the Energy and Climate Intelligence Unit (ECIU), said: “Households are being hit by back‑to‑back gas crises caused by wars thousands of miles away. Many families are still carrying debt from the last spike and have little resilience left to absorb further increases, with higher bills expected from July.

“The UK has made major progress in reaching for net zero emissions, getting off oil and gas and rolling out renewables which are now already lowering wholesale electricity prices, helping to stabilise bills by replacing gas power stations. They also strengthen the UK’s energy security by cutting the amount of gas the UK has to import, particularly as the North Sea continues its ongoing decline. Around 90% of North Sea oil and gas has already been extracted [3], a decline that cannot be reversed even with new drilling according to the industry’s own most ambitious estimates.

“But unless the UK speeds up the deployment of electric heat pumps, the UK will be left ever more dependent on foreign gas to heat its homes. With history suggesting that another oil and gas crisis is almost inevitable, more drilling won’t have any significant effect on the price households pay for gas which are driven by international markets and events like wars.”

Knock-on effects of high gas prices have been responsible for much of the remaining £1,200 increase in costs over five years. VAT accounted for around £60. Suppliers’ costs have added around £500, including £200 to cope with volatile wholesale prices and to manage customer debt that increased due to the initial gas crisis. 

Network costs added over £530 – almost £200 for gas, and £340 for electricity – with reasons including inflation in maintenance and construction costs triggered by the earlier gas crisis, the costs of balancing the power system being pushed up by gas power plants, and the costs of coping with suppliers being bankrupted by high gas prices.

More recently, network costs increases have included paying for major upgrades to electricity grids to connect more renewables, but these have been a small part of the extra costs over the past five years. Without renewables already on the system, electricity costs would have been higher still. Renewables helped stabilise electricity costs last year – with large wind farms cutting the wholesale power price by around a third [4] – but gas continues to set the electricity price the majority (around 65%) of the time under the UK’s marginal pricing system [5].

Levies added less than £110 extra over the five years, with increases in bill support and insulation schemes for low-income households (although insulation schemes have now ended), support for industry to cope with current high bills, and payments for biogas and nuclear power plants. Levies to support renewables were lower in the current five years than before the initial gas crisis, with the Government taking on 75% of the RO costs of early renewables (which were plateauing), and CfDs being instead treated as an integral part of the wider wholesale market.

In March, the Energy Crisis Commission warned [6] that the war in the Middle East was a “sobering reminder of the UK’s continued vulnerability to external energy shocks”, stating that “new UK gas extraction would do little to lower energy prices because resources are sold into, and prices set by, international markets” and called on the Government to continue its roll out of net zero tech like renewables and heat pumps.

Following the Russian invasion of Ukraine, installations of net zero technologies like solar doubled (in 2022 compared to 2021) and the number of heat pumps installations reached a new record in the year immediately after the invasion [7]. This behaviour appears to have repeated since the war in Iran began; Octopus Energy report that sales of heat pumps and solar panels both up by over 50% [8] in March 2026 on the month before. Interest in electric vehicles in Europe and the UK has also risen after the latest crisis [9] and also spiked after the Ukraine war [10], highlighting that the public see these technologies as a crucial way to gain energy independence from volatile international oil and gas markets.