The government has been urged to decouple the price of UK electricity from gas – which typically commands the highest cost per MW – to save households around £203 per year on energy bills.
Even though gas only accounts for about a quarter of electricity production in Britain, it sets the electricity price around 85% of the time – including from renewables such as solar and wind. In the UK, electricity production from offshore wind typically costs around £44 per MWh compared to an average of £114 per MWh from gas when factoring in carbon costs.
This means that cheaper renewables are given inflated prices, which helped companies to make billions in windfall profits during the last energy price crisis at the outbreak of the Ukraine war.
The left-leaning Common Wealth think tank called on the government to break the link between gas prices and electricity bills by reforming the way in which the National Energy System Operator (NESO) purchases energy for the grid. It said that NESO could act...