Study: Fossil fuel gas responsible for 80 per cent of increase in electricity prices

Analysis from think tank Ember reveals skyrocketing prices are driven almost entirely by reliance on fossil fuel gas

The skyrocketing price of fossil gas is responsible for 80 per cent of the increase in UK wholesale electricity prices experienced over the past year, a new analysis from energy think tank Ember has revealed.

Compared with the previous 12-month period, wholesale power prices have more than tripled and so has the cost of generating electricity from gas plants, the analysis shows.

Monthly average UK wholesale electricity prices surged by almost £120/MWh – from £55/MWh in the previous period to £171/MWh. The cost of fossil gas was responsible for £93/MWh or 80 per cent of the price spike, according to the analysis.

“The UK energy crisis is a fossil gas crisis,” said Sarah Brown, senior energy and climate analyst at Ember. “Luckily, the solutions are readily available: more wind turbines and solar panels. Every new domestic wind and solar project will lower electricity prices and ease the grip of volatile global gas prices.”

Ember warning that skyrocketing wholesale electricity prices are putting households and businesses under financial pressure, with more pain coming in October when the energy price cap is due to increase again. Analysts have warned average household energy bills could top £3,000 a year from October onwards.

Ember’s analysis argued that despite claims from a small group of Conservative MPs in the ‘Net Zero Scrutiny Group’ that climate policies are driving higher energy costs, the increase in wholesale prices “have almost nothing to do with green subsides or the price of carbon allowances “.

The UK remains heavily reliant on fossil gas for its electricity. According to the analysis, in 2021 the UK generated 40 per cent of its electricity from gas plants while the cost of generating electricity from a combined cycle gas power plant (CCGT) surged from £48/MWh to £227/MWh between December 2020 and December 2021.

The analysis is broadly shared by Ministers, with Business Secretary Kwasi Kwarteng arguing that the government was working to curb reliance on gas imports. “Eye-watering gas prices are hitting consumers across Europe,” he said. “The more cheap, clean power we generate within our own borders, the better protected we will be from volatile gas prices that are pushing up bills.”

While Ember’s new analysis focused on the rise in fossil fuel prices, it also noted that the UK recently held a record-breaking renewables lowest on 7 July which secured 11GW of clean energy at the wind and solar energy prices to date.

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