Otis Singleton
The price of electricity in the UK has been steadily increasing since 2021, with wholesale prices reaching record highs during the 'energy crisis' in 2022. The crisis was caused by a combination of factors, including the reopening of economies after the COVID-19 pandemic, reduced supply from producers, and increased tensions between Russia and Ukraine. The Russian invasion of Ukraine in February 2022 further exacerbated the issue, causing oil and gas prices to surge due to concerns about supply disruption and sanctions on Russia. The UK's heavy reliance on gas imports has been identified as the primary driver of higher electricity prices in the country. The UK government has implemented various measures, such as the Energy Price Guarantee, to support consumers and reduce the impact of rising energy costs. Despite some recent decreases, energy prices remain well above pre-'energy crisis' levels, and there seems to be little prospect of significant bill reductions in the near future.
| Characteristics | Values |
|---|---|
| Date of electricity price increase in the UK | 1 April 2021 |
| Reason for price increase | Rise in demand for oil and gas as economies came out of lockdown, reduced supply of fuels from some producers, and increased tensions between Russia and Ukraine |
| Percentage increase in electricity prices | 6.4% in April 2025 |
| Average price of electricity per kilowatt-hour (kWh) | 24.9 p/kWh as of April 2025 |
| Average standing charge for electricity | 61.0 p/day as of April 2025 |
| Impact of price increase | Higher energy bills for households, affecting vulnerable customers and low-income households |
| Government response | Energy Price Guarantee (EPG) introduced in October 2022 to reduce the extent of price increases for domestic customers, Energy Bill Support Schemes (EBSS), payments for households not on the gas grid |
| Future plans | Reduce dependence on fossil fuels, increase use of renewable energy sources, remove nearly all fossil fuels from electricity production by 2030 |
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What You'll Learn
The energy crisis
The UK's electricity market price is set by gas 98% of the time. In 2021, as countries emerged from pandemic-related lockdowns, demand for oil and gas increased. Supply did not keep up, and this, coupled with rising tensions between Russia and Ukraine, caused wholesale energy prices to increase rapidly.
The Russian invasion of Ukraine in February 2022 caused oil and gas prices to jump due to concerns about supply disruption. Sanctions on Russia, an embargo on Russian oil, a potential embargo on Russian gas, and cuts in Russian gas supply to Europe further pushed up prices. The price of electricity produced from gas increased in line with gas prices, and effectively set the price for all power on wholesale markets.
The UK's reliance on gas has been a significant factor in its high electricity prices. In France, for example, where nuclear reactors contribute more than two-thirds of its electricity, market prices tend to be lower because gas plants dictate the market price only 7% of the time. In Germany, where renewables make up over half of its electricity, gas plants set the market price about a quarter of the time.
The UK government has pledged to reduce energy bills by using more renewables, but bills are currently rising. In the long term, renewables will bring down energy bills, but savings in the short term are not guaranteed. A faster rollout of renewables could mean upfront costs, such as upgrading the grid, are passed onto consumers more quickly.
The energy price cap, set every three months by Ofgem, fixes the maximum price that can be charged for each unit of energy on a standard or default variable tariff. The price cap rose in April 2022, causing the annual bill for a household using a typical amount of gas and electricity to increase to £1,849 per year. The energy price cap rose again in April 2025, with the average price of electricity at 24.9 pence per kilowatt hour.
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The Ukraine conflict
The conflict in Ukraine has had a significant impact on electricity prices in the UK. In the lead-up to Russia's full-scale invasion of Ukraine in February 2022, there was an increase in demand for oil and gas as economies worldwide emerged from lockdown. This surge in demand was met with a lag in supply, causing wholesale energy prices to increase. The Russian invasion further exacerbated the situation, with sanctions on Russia, an embargo on Russian oil, and potential disruptions to Russian gas supplies pushing prices even higher.
The UK's reliance on gas for electricity generation and home heating made it particularly vulnerable to price shocks in the gas market. Gas prices directly influence electricity prices in the UK, as gas is the most expensive form of power and dictates the price of all electricity. As a result, UK households faced soaring energy bills, with the average annual bill for gas and electricity rising significantly. The energy price cap, which was intended to protect consumers from overcharging, was adjusted to reflect the higher prices, but it still resulted in significantly higher costs for households.
To mitigate the impact of rising energy prices, the UK government introduced various support programmes, including the Energy Bill Support Schemes (EBSS) and the Energy Price Guarantee (EPG). These schemes aimed to limit energy bill increases and provide financial assistance to vulnerable households. Additionally, the government set a target to install 600,000 heat pumps per year by 2028 and encouraged energy efficiency measures to reduce gas demand and lower household energy costs.
The conflict in Ukraine has highlighted the UK's vulnerability to fluctuations in the gas market and the need to transition to cheaper and more sustainable energy sources. While renewables like wind, hydro, and solar have helped cushion electricity price increases, the UK's energy infrastructure remains heavily reliant on gas. As the conflict in Ukraine continues, the UK faces the challenge of ensuring energy security and affordability while reducing its dependence on fossil fuels.
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The UK's reliance on gas
More than four-fifths of homes in the UK are heated by gas, and almost half of the country's electricity is produced by burning it. This heavy reliance on gas has been influenced by various factors, including labour disputes, the development of the North Sea industry, and the influence of the hydrocarbon industry on government decisions. The UK's failure to reduce its demand for gas has left it exposed to the volatile global fossil fuel market.
The UK's energy crisis has resulted in rising energy bills, with gas and electricity prices increasing at a faster rate than the EU average in 2022. Wholesale energy prices began to rise rapidly in the second half of 2021 and continued to climb in 2022, with the Russian invasion of Ukraine further disrupting supply and pushing prices higher. While the UK is not dependent on Russian gas supply, with domestic production meeting around half of its annual gas supply, the country's overall reliance on gas has contributed to the severity of the energy crisis.
The UK government has implemented various measures to support households and businesses with rising energy costs. This includes the Energy Price Guarantee, which limits bills, and the Energy Bill Support Schemes, providing payments to help with energy bills. The government has also announced plans to expand eligibility for the Warm Home Discount and increase the National Living Wage to £9.50 an hour. However, critics argue that the price cap is insufficient and that the government has failed to address the underlying issue of the UK's dependence on gas.
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The price cap
The energy price cap is set by Ofgem and fixes the maximum price that can be charged for each unit of energy on a standard or default variable tariff for a typical dual-fuel household that pays by direct debit. The price cap is reviewed and changed every three months and can go up or down. The price cap does not apply to non-domestic energy, or Northern Ireland, which has its own energy market.
The energy price cap is intended to protect customers from being overcharged by energy suppliers by reflecting the true cost of supplying energy. However, critics of the price cap have called it a "halfway house", arguing that it only serves a niche group of consumers and has distorted the market.
In April 2025, the price cap rose by 6.4%. The average price of gas was 6.3 pence per kilowatt-hour, while the average price of electricity was 24.9 pence per kilowatt-hour. This increase was attributed to the UK's reliance on fossil fuel markets and the high cost of gas in the energy market.
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Government support
The UK government has introduced various support programmes to assist households and businesses with the rising cost of electricity and energy. In 2021, the Household Support Fund was introduced to help vulnerable customers, and this has been extended until March 2026. Additionally, the Warm Home Discount scheme continues to provide discounts to eligible pensioners and low-income households.
In 2022, the Energy Price Guarantee (EPG) was implemented, which limited bills to £2,500 from October 2022 for a household with typical consumption. The Energy Bill Support Schemes (EBSS) also provided payments to eligible households. The EBSS offered £66 per month to those on prepayment meters through redeemable vouchers, while other energy users received the money directly in their bank or energy accounts.
The government has also committed to supporting businesses and public sector organisations with their energy costs. The Energy Bill Relief Scheme (EBRS) provided a cap on electricity and gas prices per megawatt-hour from October 2022 until March 2023. Additionally, the British Industry Supercharger scheme was announced to provide extra support to 'energy-intensive industries'.
In Northern Ireland, the government announced support equivalent to the Energy Price Guarantee for households, which was introduced in November 2022 bills and backdated to October. A £600 payment was also provided to all households in Northern Ireland for the 2022/23 winter period, comprising the £400 Energy Bills Support Scheme and the £200 Alternative Fuel Payment.
The government has pledged to reduce energy bills by increasing the use of renewable energy sources. They aim to remove nearly all fossil fuels from UK electricity production by 2030. However, in the short term, the transition to renewables may result in upfront costs being passed on to consumers.
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Frequently asked questions
Electricity prices in the UK have been increasing since the second half of 2021, with the largest monthly increases in April 2022.
The price increase was caused by a combination of factors, including the reopening of economies after pandemic-related lockdowns, reduced fuel supply, and the conflict in Ukraine.
The UK government has implemented various measures to support consumers, including the Energy Price Guarantee (EPG), which limits price increases, and the Energy Bill Support Schemes (EBSS). The government is also working to reduce dependence on imported fossil fuels and increase the use of renewable energy sources.
