A detailed analysis by thinktank Nesta shows that wholesale gas prices account for the substantial majority of recent increases in UK household energy bills, according to research shared with Carbon Brief. The figures demonstrate that wholesale gas costs drove approximately 90% of the rise in electricity bills and 77% of the increase in gas bills since 2020.
The findings challenge prevailing narratives in UK media and political discourse attributing high energy costs to net-zero policy targets. Andrew Sissons, director for sustainable future at Nesta, contends that net-zero initiatives are actually “helping to shelter Britain from the impact of expensive gas.” He notes that the country faces particular vulnerability because more than 80% of households depend on gas mains connections, while the electricity system remains heavily reliant on gas as a marginal generating source. The analysis indicates that renewable energy contracts for difference are currently reducing electricity bills by £17 under the current price cap, contrary to public perception.
Current wholesale gas prices reflect global market pressures, including ongoing Middle East conflict. As of mid-October, UK wholesale gas prices reached 220p per therm, exceeding the 2022 average of 210p per therm, which was itself elevated following Russia’s invasion of Ukraine in 2022. The Nesta figures quantify this impact: a typical UK household electricity bill increased by £180 in real terms from the fourth quarter of 2020 to the fourth quarter of 2026, with £161 of that rise attributable to wholesale costs.
Other bill components show more modest impacts. Network costs added £72 to typical bills, primarily for transmission network investment. Balancing costs, including constraint payments for managing wind generation, totaled only £35 annually. Government policy changes, including the transfer of legacy renewable support costs to general taxation and VAT removal, reduced the policy cost component of bills from £183 in October 2020 to £114 in October 2026.
For dual-fuel bills combining electricity and gas, increases totaled 47% in real terms over the period, rising from £1,175 to £1,723 annually. Wholesale costs accounted for 81% of this increase. Electricity prices have begun to decouple from gas prices since recent geopolitical developments, reflecting growth in renewable generation capacity. Industry analysts project further bill increases under the January 2027 price cap amid persistent high gas prices.
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