New research from thinktank Nesta reveals that surging wholesale gas prices are the primary driver behind recent increases in UK household energy bills, accounting for approximately 90% of electricity bill rises and 77% of gas bill increases since 2020.
The analysis directly challenges widespread perceptions that net-zero climate policies are responsible for higher energy costs. According to Andrew Sissons, director for sustainable future at Nesta, renewable energy support is actually reducing electricity bills by £17 under the current price cap, while net-zero measures are “helping to shelter Britain from the impact of expensive gas.” The UK remains particularly vulnerable to gas price fluctuations, with over 80% of households connected to gas mains and the electricity system still relying heavily on gas as a backup generation source.
The figures show that typical UK annual household electricity bills have increased by £180 in real terms since the fourth quarter of 2020, with wholesale costs accounting for £161 of that rise. Network costs have contributed £72, while renewable energy contracts for difference have provided a modest reduction. In contrast, wholesale gas costs drove a £283 increase in household gas bills out of a total £368 rise. Combined dual-fuel bills have increased from £1,175 annually in October 2020 to £1,723 in October 2026, representing a 47% increase in real terms.
Current UK wholesale gas prices stand at 220p per therm as of 19 October, exceeding the 2022 average of 210p per therm amid ongoing Middle East conflict. Notably, electricity bill growth has decelerated relative to gas bills in recent months, driven by increased renewable generation capacity. Policy costs for electricity have decreased from 16% of total dual-fuel bills in October 2020 to 7% as of October 2026, after government measures including moving renewable support costs to general taxation and removing VAT.
Expectations point to significant bill increases under the January 2027 price cap, potentially rising by as much as 25%, as wholesale gas prices remain elevated. Government officials are reportedly considering measures to assist households and businesses during the upcoming budget on 28 October.
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