Prime Highlights-
- The UK government plans to reduce the link between electricity prices and gas markets to protect households from sudden bill shocks.
- Older renewable energy generators may be moved to fixed-price contracts to help keep electricity prices more stable.
Key Facts-
- Older renewable projects account for around one-third of Britain’s electricity generation and are expected to shift to the new system within the next year.
- The proposed changes are likely to be introduced within about 12 months, following a consultation process.
Background-
The UK government is set to announce plans to reduce the link between electricity prices and volatile gas markets to protect households from sudden energy bill shocks and support its clean power strategy.
The proposal, which Chancellor Rachel Reeves and Energy Secretary Ed Miliband are expected to announce, will ask older renewable energy generators to shift to fixed-price contracts instead of the current system, where electricity prices often move with gas prices. The government believes the change could help shield consumers from price spikes triggered by international conflicts and instability in fossil fuel markets.
Under the existing system, wholesale electricity prices are frequently set by the last unit of power needed to meet demand, which in Britain is often gas. As a result, any sharp rise in gas prices quickly feeds through to household electricity bills, even when a large share of power comes from lower-cost wind and solar generation.
The government does not plan to overhaul the entire market immediately but wants older renewable projects, which account for roughly one-third of Britain’s electricity generation, to move to fixed-price contracts within the next year. Analysts say this would help bring greater price stability and allow consumers to benefit more directly from the lower operating costs of renewable energy.
Officials said the plan will be subject to consultation, though they expect the changes to be introduced within about 12 months. While the government has not given an exact estimate of savings, it said the reduction in bills could be significant.
Alongside the pricing reform, the government is also expected to announce changes to planning rules to make it easier for households without driveways to install electric vehicle charging points and for businesses to add solar panels, as part of its wider push for clean energy and lower long-term costs.