
Breadcrumbs
Gas price spike to add £29 billion to UK electricity bills next year
Forecasted increase in the cost of fossil gas to the UK will be equivalent to more than 1% of the country's GDP
About
New forecast from energy think tank Ember shows an extraordinary increase in electricity prices for households and industry when compared to projections by the government’s BEIS department.
Executive summary
Gas prices set to add an extra £29 billion to 2022 UK electricity prices
A new forecast by energy think tank Ember examines fossil gas and electricity forward prices for calendar year 2022, and compares them with the most recent price forecasts by BEIS (the Department of Business, Energy, and Industrial Strategy).
COO, Ember
A gas phase-out insulates the UK from the ongoing risk of unexpected price shocks in the global fossil fuel market. With an out of control global fossil gas price, the only escape route is rapidly building clean power, especially offshore wind. The government’s commitment to a 2035 gas phase-out is essential to insulate ourselves from future gas crises. Every new domestic wind turbine the UK builds will cut exposure to imported fossil gas – and keep energy bills lower.

Spiking gas prices drive up electricity costs
Businesses and consumers face paying the bill for UK gas dependence
The 2035 gas phase out – as committed to by the government – is vital to reduce exposure to the volatile global fossil gas price.
The surge in fossil gas prices has significantly increased the cost of generating electricity in the UK. For calendar year 2022, the cost of fossil gas fuel required to generate electricity is currently £105/MWh*. Using the forecast 2022 gas prices from BEIS, the cost of producing electricity from gas would have been £34/MWh. This represents a jump of £71/MWh. Consequently, the rise in fossil gas costs accounts for ~80% of the electricity price increase of £91/MWh.
*Fossil gas cost calculations based on a plant efficiency rate of 55% (Lower Heating Value) excluding carbon costs.
Conclusion
Gas dependence is costing the UK
Clean power is the solution
Rapidly phasing out fossil gas from the UK electricity grid is the most significant way to bring spiking power sector costs down. Recent Ember analysis found that electricity from new wind and solar is already significantly cheaper than existing gas generation in the UK. The government’s new commitment to a 2035 gas phase-out (as recommended in Ember’s recent Clean Power Plan) must be swiftly followed by the policy that will facilitate the build out of clean power, including investment in innovative long-term energy storage and deployment of offshore wind.
Supporting Material
Methodology
Notes
- Ember’s calculations do not include the reduction in costs that may be achieved through hedging. However, this is likely to be a very minor reduction.
- Some low-carbon power on Contract For Difference contracts will have to pay back money to the government when power prices are very high. However, these negative feedbacks are likely to be a minor reduction on the overall cost.
- National Grid sees a very rapid decline in fossil gas in all scenarios which meet climate targets, with 97%+ of generation coming from fossil-free sources by 2030.