As the UK races towards a dramatically increasing energy price cap in July, all eyes are on domestic energy bills that are fast becoming unaffordable to the average household.
Despite adopting clean energy initiatives such as heat pumps, electric vehicles and individual-use solar panels, and backing renewable energy companies – all of which our government are telling us will decrease the average annual energy bill – UK households are still being hit with wildly increasing gas & electric payments, contributing significantly to the ongoing cost of living crisis experienced over the last few years.
And, although the crux of the issue is a multi-faceted, complicated mix of legacy fossil fuel calculations and overall market volatility, the average media article would have many of us mistakenly blaming renewable energy companies for profiteering; demonising the very companies that hold the key to the UK’s long term energy security and energy price stability.
So, what’s really going on, and what is the solution to bringing down UK household bills?
The Marginal Pricing Anomaly
Currently, although gas accounts for about a quarter of the UK’s energy consumption, gas sets the wholesale price of electricity and – due to ongoing conflicts in the Middle East, particularly – the price of gas has risen to dizzying heights over the last few months, with demand far outwaying availability and supply.
In 2021, for example, gas set the wholesale price of electricity 97% of the time, even though it only accounted for 37% of actual generation.
This means that, even if a wind farm produces electricity at almost zero marginal cost, the market pays the wind farm the same price as the most expensive gas-fired plant currently running; essentially, the wholesale market works like a stack and, if demand is high, the last generator needed – usually gas – sets the clearing price for every generator in that hour.
The result being that wind, solar, and nuclear generators are paid an inflated price set by gas
This leads to the so-called windfall profits described by mainstream media for clean energy producers, and higher costs for consumers.
And, whilst this is certainly causing issues for the end user – i.e. the average UK household – this is certainly not a case of clean and renewable energy companies doing anything wrong, rather, it’s a failure of the overall system.
Indeed, these companies are not ‘raking it in’ by choice; they are simply playing by the rules of a market designed decades ago for a fossil-fuel-centric grid.
Demonising these producers is not only a distraction from the real issues facing the energy market, it is a dangerous one; shifting the public focus away from the urgent structural reforms needed to decouple electricity from gas, effectively scapegoating the very technology required to achieve long-term energy price stability.
Pot Zero and Gas Decoupling
Recently, Ed Miliband announced plans to launch Pot Zero and decouple gas from electricity in a bid to lower household energy prices and, indeed, back in March of this year, analysis from thinktanks like Common Wealth suggested that stopping expensive fossil gas from setting the price of all energy could save the average household up to £203 per year.
However, these plans are still in their tentative stages and may take some time to come into fruition.
The Rise of Evergreen Infrastructure
Beyond policy shifts and drastic market changes lies another solution: the rise of ‘Evergreen Infrastructure’ – that is, infrastructure designed to weather government policy storms and instead rely on commodity stacks, baseload power, and design resilience.
By shifting to a model where energy assets are multi-commodity refineries – selling baseload power, green fertiliser, and carbon capture services into private markets – we can build a localised, price-insulated energy future that doesn’t just wait for government policy to ‘fix’ the grid, but renders the broken wholesale model irrelevant.
The UK’s energy transition is currently trapped in a tug-of-war between 20th-century market rules and 21st-century environmental imperatives; but we are done waiting for the grid to catch up or for the political pendulum to stop swinging.
The future of British infrastructure isn’t found in government subsidies or political promises, rather it is being engineered in the field, one Evergreen asset at a time.
We are building a system that doesn’t just survive the volatility; it makes it irrelevant.
