Why Aren’t My Energy Bills Lower with More Renewables?

You might be wondering why, despite the UK’s increasing reliance on renewable energy, your electricity bills aren’t dropping. It’s a complex issue with several contributing factors.

The Reality of Rising Bills

Despite government pledges to reduce energy costs through renewable energy, Ofgem has announced that energy bills will rise more than expected from April. This leaves many questioning why the growth of renewable energy isn’t translating into lower prices.

Key Factors Influencing Energy Bills:

• Wholesale Gas Prices:
  • The largest and most variable part of your electricity bill is the wholesale price, which is heavily influenced by international gas prices.
  • Even when gas generates a small percentage of the UK’s power, it often sets the wholesale price.
• Infrastructure Costs:
  • Upgrading the aging electricity grid to accommodate renewable energy sources is expensive.
  • There are also costs involved in paying wind farms to stop generating when the grid can’t handle the excess power.
• Investment in Renewables:
  • Building renewable energy infrastructure, especially offshore wind farms, requires significant upfront investment.
  • The government uses “strike prices” to incentivise renewable energy companies to build wind farms. These prices are then passed onto the consumer.
• Market Structure:
  • The way the wholesale electricity market is structured means that the price is set by the most expensive form of energy being used at any given time.
  • Great Britain relies on gas more than many European countries, which means that gas prices have a larger impact on electricity prices in the UK.
• Policy Costs:
  • Government levies to fund environmental projects are included in your electricity bill.
  • Some argue that these costs should be shifted to gas bills or general taxation.

UK Electricity Prices Compared:

• UK domestic electricity prices rank among the highest in Europe.
• UK industrial electricity prices are even higher than domestic prices.
• The UK’s electricity prices are much higher than large economies outside of Europe, such as the US and Canada.

The Future of Renewable Energy and Bills:

• In the long term, renewable energy is expected to lower electricity bills.
• However, in the short term, the costs of upgrading the grid and investing in renewable energy infrastructure could be passed on to consumers.
• The government is reviewing the electricity market structure to find ways to lower costs.

What This Means for You:

While renewable energy holds promise for lower bills in the future, several factors are keeping prices high in the present. It’s essential to stay informed about energy market developments and explore ways to reduce your energy consumption.

• Call Energy Advice Helpline for free on 0800 802 1869
• Complete our short eligibility checker to find out if you qualify for free help to reduce bills or improve the energy efficiency of your home.

Source: Information gathered from reports published by the BBC.