Energy Aftermath

This comprehensive analysis examines the dramatic transformations in UK household electricity and gas prices from 2010 through mid-2025, with particular focus on the unprecedented 2021-2023 energy crisis and its lasting impacts. The report examines the complex factors driving energy costs, compares UK prices with those of European counterparts, evaluates policy interventions, and assesses the impact of the renewable energy transition on consumer bills. Readers will gain insights into the structural issues in the UK energy market, the ongoing affordability challenges despite price moderation, and the outlook for future price trends as the UK transitions to a renewables-dominated energy system.

The Takeaway

1. Despite recent price moderation, UK energy costs remain 42% higher than pre-crisis levels, with the typical household paying £1,720 annually as of July-September 2025

2. UK electricity prices are now among the highest in Europe, while gas prices remain relatively competitive, creating a problematic imbalance for electrification efforts

3. Gas power stations set UK electricity prices 97-98% of the time, despite generating only 28% of electricity, preventing consumers from benefiting from cheaper renewable generation

4. Policy levies are disproportionately applied to electricity (82%) versus gas (18%) bills, creating perverse incentives against decarbonization

5. Fuel poverty affects 6.1 million UK households as of January 2025, with energy debt reaching a record £3.85 billion

6. Over 2 million people disconnect from energy at least once due to the inability to afford prepayment meter top-ups, with vulnerable groups disproportionately affected

7. Domestic energy consumption declined by 16% in 2022 and a further 6% in 2023 as households made significant sacrifices to manage costs

8. Significant regional disparities exist, with households in North Scotland and North Wales paying around £100 more annually for electricity than those in London

9. Renewable energy now provides 45-47% of UK electricity generation, but the current market structure prevents these cost benefits from reaching consumers

10. The long-term outlook suggests a more stable, renewables-dominated energy system that could eventually deliver lower costs, but requires addressing structural market issues

• UK Energy Crisis: Aftermath and Recovery

• The Takeaway

• Overview

• The UK Energy Price Crisis and Recovery (2021-2025)

• International Comparisons: UK vs. European Energy Prices

• Drivers of UK Electricity Prices

• - The Gas Price Connection

• - Renewable Energy Paradox

• - Policy Levies and Taxes

• Infrastructure Limitations

• Regional Variations in UK Energy Prices

• Fuel Poverty and Energy Affordability

• Policy Impacts on Energy Prices

• Renewable Energy and Price Impacts

• The Role of Gas in UK Electricity Pricing

• Consumer Impact and Vulnerability

• Market Structure and Regulatory Framework

• Future Outlook and Projections

• Conclusion: Key Findings and Implications

• Sources

Overview

The UK energy market has undergone dramatic transformations over the past decade, with household electricity and gas prices experiencing unprecedented volatility. Between 2010 and 2025, consumers are expected to experience significant price fluctuations driven by global market forces, domestic policy decisions, and the ongoing transition to renewable energy sources. The period from 2021 to 2023 saw particularly extreme price volatility, with the energy crisis pushing millions of households into fuel poverty. While prices have moderated somewhat since their peak, they remain substantially higher than pre-crisis levels, creating ongoing affordability challenges for UK consumers.

This report provides a comprehensive analysis of UK household electricity and gas wholesale prices from 2010 through June 2025, with particular emphasis on the dramatic market shifts of 2020-2025. It examines the complex interplay of factors driving energy prices, compares UK energy costs with European counterparts, assesses the impact of key policy interventions, and evaluates how the renewable energy transition is affecting consumer bills.

The UK Energy Price Crisis and Recovery (2021-2025)

Key Points

The 2021-2023 energy crisis represented an unprecedented shock to UK household finances, with prices reaching historic highs before gradually moderating. Despite recent decreases, energy costs remain substantially higher than pre-crisis levels, with the typical household paying 42% more for energy in 2025 than in winter 2021/22. Government interventions like the Energy Price Guarantee prevented even more extreme price increases but have since been phased out in favour of Ofgem's price cap mechanism.

The Crisis Timeline

The UK energy market experienced extraordinary volatility between 2021 and 2025, with prices reaching unprecedented levels during what became known as the "energy crisis." According to the UK Parliament Commons Library, "Global prices for gas, electricity, oil and other fuels started to increase from summer 2021 when economies began opening up after pandemic-related lockdowns. This underlying increase was magnified by reduced supply of fuels from some producers and increased tensions between Russia and Ukraine." [2]

The crisis peaked in 2022, with wholesale gas prices spiking to nearly 20 pence per kWh in August 2022 before gradually stabilising in subsequent years. [2] This dramatic increase in wholesale costs was rapidly reflected in consumer bills, necessitating government intervention.

Government Response: The Energy Price Guarantee

As energy prices soared, the UK government implemented the Energy Price Guarantee (EPG) in October 2022. E.ON Next describes the initial announcement: "On 8 September 2022, the government announced changes to how energy bills will be charged to help reduce the impact of the proposed October price cap. The then Prime Minister, Liz Truss, said that average bills will be held at £2,500, under the Energy Price Guarantee (EPG), for the next two years." [4]

The EPG proved critical in shielding consumers from the full impact of wholesale price increases. According to the Institute for Government, "Between October 2022 and June 2023, in the face of soaring energy bills, the 'Energy Price Guarantee' limited prices for typical households to £2,500 per year." [5] Without this intervention, consumers would have faced dramatically higher costs: "Without the EPG, customers would have paid more under the price cap between October 2022 and June 2023. The reduction in the price cap in April 2023 was not large enough to take it below the EPG level, so customers did not see their bills fall until the cap fall at the time." [2]

Current Price Levels (2025)

While energy prices have declined from their crisis peak, they remain substantially higher than pre-crisis levels. According to Ofgem, "Between 1 July and 30 September 2025, the energy price cap is set at £1,720 per year for a typical household that uses electricity and gas and pays by Direct Debit. This is a decrease of 7% compared to the cap set between 1 April and 30 June 2025 (£1,849)." [1]

Despite this recent reduction, the UK Parliament Commons Library notes that "Despite the fall in prices in late 2023 and much of 2024, typical bills under the July to September 2025 price cap will still be 42% higher than in winter 2021/22." [2] This persistent elevation in prices continues to create affordability challenges for many households.

The price cap for July to September 2025 includes the following unit rates and standing charges:

• Electricity unit price: 25.73 pence per kWh (down from 27.03p)

• Gas unit price: 6.33 pence per kWh (down from 6.99p)

• Electricity daily standing charge: 51.37 pence (down from 53.80p)

• Gas daily standing charge: 29.82 pence (down from 32.67p) [1]

Wholesale Cost Trends

Wholesale energy costs, which comprise the largest component of consumer bills, have exhibited significant volatility throughout the crisis and recovery periods. According to Ofgem, wholesale energy costs have dropped from £841 to £734 between April and July 2025, representing a £106 reduction. [1] This decline in wholesale costs is the primary driver behind the 7% reduction in the price cap for July to September 2025.

The Energy and Climate Intelligence Unit (ECIU) notes that "The single largest component of household electricity bills is the wholesale electricity price. In 2024, the wholesale price made up 32% of the typical annual household electricity bill, but in 2022 during the peak of the gas crisis, this was higher at 68%." [11] This significant reduction in the wholesale component's proportion of bills reflects both the moderation in wholesale prices and the increasing importance of other bill components.

International Comparisons: UK vs. European Energy Prices

Key Points

The UK's position in international energy price comparisons has deteriorated significantly, with electricity prices now among the highest in Europe while gas prices remain relatively competitive. By late 2023, UK household electricity prices had risen to levels higher than any EU country, while maintaining some of the lowest gas prices. This divergence creates a problematic imbalance as the UK transitions toward greater electrification for heating and transportation. The high electricity-to-gas price ratio in the UK (4.7 compared to the EU average of 2.5) creates perverse incentives that work against decarbonization goals.

UK's Position in European Price Rankings

The UK's electricity prices have risen dramatically relative to European counterparts in recent years. According to Nesta, "Household consumers in the UK faced higher electricity prices in the second half of 2023 than those in any of the 27 EU countries – standing at £0.36 per kWh (all taxes and levies included)." [7] This represents a significant shift from the UK's historically competitive position in European electricity markets.

Meanwhile, UK gas prices have remained relatively low by European standards. The UK Parliament Commons Library reports that "UK domestic gas prices in the second half of 2024 were below those in 16 EU countries. UK electricity prices were higher than in all but three EU states (Germany, Denmark and Ireland). Electricity prices in the UK have gradually become more expensive than in most other EU countries." [2]

European Price Variations in 2025

Across Europe, electricity prices show significant variation. According to Euronews, "As of 3 January 2025, residential end-user electricity prices varied widely across Europe, ranging from 9.1 c€/kWh in Budapest to 40.4 c€/kWh in Berlin, while the EU average stood at 25.5 c€/kWh." [8]

Eurostat data from April 2025 confirms this wide dispersion: "For household consumers in the EU (defined for the purpose of this article as medium-sized consumers with an annual consumption between 2,500 Kilowatt hours (KWh) and 5,000 KWh), electricity prices in the second half of 2024 were highest in Germany (€0.3943 per KWh), Denmark (€0.3763 per KWh), Ireland (€0.3699 per KWh) and Belgium (€0.3313 per KWh)." [6]

Across the EU, residential end-user gas prices ranged from 2.5 c€/kWh in Budapest to 33.3 c€/kWh in Stockholm—over 13 times higher than in Budapest.

Gas prices show even more dramatic variation: "Across the EU, residential end-user gas prices ranged from 2.5 c€/kWh in Budapest to 33.3 c€/kWh in Stockholm—over 13 times higher than in Budapest." [8]

Purchasing Power Adjusted Comparisons

When adjusting for purchasing power, the relative burden of energy costs shifts significantly across European countries. Euronews reports: "When adjusted for purchasing power standards (PPS), electricity price rankings shift significantly, as PPS provides a fairer comparison. As an artificial currency unit, it eliminates general price level differences." [8]

This adjustment reveals that nominal prices can be misleading when assessing the actual burden on households: "The most dramatic ranking changes include: Bern dropped from 5th in EUR to 23rd in PPS, Luxembourg City dropped from 12th in EUR to 24th in PPS, Copenhagen dropped from 3rd in EUR to 15th in PPS, Warsaw moved up from 18th in EUR to 6th in PPS, Vilnius moved up from 16th in EUR to 7th in PPS." [8]

Energy's Share of Household Budgets

The proportion of household budgets dedicated to energy costs has increased significantly during and after the energy crisis. Euronews notes that "Energy bills play a crucial role in household budgets, with electricity, gas, and other fuels accounting for 5.5% of total household spending in the EU in 2023. This is especially significant for low-income households, as they have to allocate a larger share of their budget to energy costs." [8]

In the UK specifically, Consumer Scotland reports that "household expenditure on electricity and gas as a share of total household spending increased by 70%, from 2.4% in 2021-2022 to 3.4% in 2022-2023, and has fallen to 3% in 2023-2024." [18] While this represents an improvement from the peak of the crisis, it remains significantly higher than pre-crisis levels.