NOT A LOT OF PEOPLE KNOW THAT

By Paul Homewood

Are our high electricity prices really the fault of Vladimir Putin?

There are some very simple official statistics that show just how little effect the recent rise in natural gas prices has had on the electricity market.

According to DUKES, in 2023, 181 TWh of gas was used for electricity generation. (It generated 101 TWh, meaning an efficiency rate of 55%, which sounds reasonable).

Natural gas prices have risen from 62p/therm in Dec 2018 to 86p in March 2025, that is £21.16 and £29.35/MWh.

Therefore the cost of that 181 TWh has increased from £3.8 billion to £5.3 billion, a rise of £1.5 billion.

Now let’s consider OFGEM’s Energy Price Cap, introduced in January 2019:

https://www.ofgem.gov.uk/energy-policy-and-regulation/policy-and-regulatory-programmes/energy-price-cap-default-tariff-policy/energy-price-cap-default-tariff-levels

We can see that the cap has gone up from £685 to £1235, based on 4200 kWh a year (incl standing charges but before VAT).

We can convert that back to £163/MWh in 2019 and £294/MWh now.

Annual electricity supply is around 280 TWh, so we can extrapolate an annual cost increase from £45.6 billion to £82.3 billion.

In other words, while electricity costs have risen by £36.7 billion, only £1.5 billion is explained by the higher cost of gas.

We have of course assumed that domestic energy cap prices have risen in line with industrial ones. And the setting of energy caps is not just based on one months wholesale prices, so my analysis is a bit simplistic.

Nevertheless, however you look at changes in the market price for gas, they are completely dwarfed by the rise in electricity prices to consumers.

Clearly most of the rise has been caused by what we might loosely describe as “government policy”. This could include renewable subsidies, grid upgrades and balancing costs, carbon taxes and even how market pricing works.

They are all, one way or another, within the ability of government to control.

This is already turning into a long post, so I’ll finish here. Hopefully I’ll add a few more thoughts tomorrow.