Are UK consumers paying too much for their power?

30 Oct 2018

Government policies are not to blame for recent electricity price hikes, say leading energy scientists.

Research published today by the UK Energy Research Centre sheds new light on the long running debate over whether UK electricity prices are higher than they need be, and if so, who is to blame?

All of the Big Six energy companies have announced price increases this year, citing higher wholesale prices and energy policy costs. Energy prices have been high on the political agenda with the government’s ‘Tariff Cap’ Act passed earlier this year. A new report ‘What’s in a bill? How UK household electricity prices compare to other countries’ provides an in-depth assessment of domestic energy prices, considering how household bills compare to other countries.

Policy costs as a proportion of bills

In-depth analysis of domestic power prices in the UK, Germany, France, Sweden and Australia finds that UK policy costs are in fact the lowest amongst the European study countries.

Some energy companies have cited higher wholesale prices and energy policy costs as drivers for recent price rises. The report finds that wholesale prices are relatively high in the UK but there is no evidence that policy costs are the primary driver of price hikes. Drilling down into the data, the research focuses on three cost components - energy and supply, network costs, and taxes and levies. These differ amongst the study countries, with the proportion attributable to taxes and levies in the UK lower than in any of the EU study countries.

Key findings:
  • Though policy costs have increased in recent years, domestic electricity bills have not increased at the same rate due to improved energy efficiency.
  • Support for low-carbon generation in the UK is good value for money compared to other EU nations and contrary to the assertion by many that the UK is over-paying for climate action.
  • The overall picture is complex, with a wide range of consumer types and multiple policy impacts. This may allow different stakeholders to interpret and represent the facts differently.

Dr Rob Gross, UKERC Co-Director and report author says:

“Markedly differing contexts between countries and even within countries, means that caution should be exercised when comparing prices. But it is a total myth that UK consumers pay more for green policies than consumers in other countries.”

Dr Phil Heptonstall, UKERC researcher and report author says:

“It is hard to understand why, given the high quality of the data, there is continuing disagreement over how policies influence consumer bills. Perhaps the complex data can be manipulated to suit the interests of different stakeholders”

Figure 3.2. Total policy cost comparisons

 

Figure 3.4. Breakdown of 2016 domestic consumer band DC prices