- Electricity prices will increase to 24.85p per kWh from January 2025
- There are two main factors increasing the price of electricity: the global gas shortage and environmental taxes
- Gas prices are exploding across Europe, which is partly due to lack of supply from Russia, as well as an increase in demand around the world
As the world steps away from fossil fuels, our reliance on electricity increases. While that might be good for the planet’s sake, it’s leaving many people with pricier bills.
Anyone without a set of solar panels on their roof will have noticed the price of electricity spike – particularly in the past year. In fact, energy prices will have increased a total of 11.2% since October 2024, but what is making electricity nearly three times more expensive than gas and other fossil fuels?
There are a few key factors, including the global gas crisis and green levies.
Want to learn more? Let’s take a closer look at why electricity is more expensive than gas, and how UK prices compare to prices in other countries around the world.
The cost of electricity and gas in the UK
The cost of electricity and gas has exploded across the world in the past year – and the UK is at the forefront of the issue.
In 2021, the UK seven-day average price of gas reached prices of 12.8p per kWh – over eight times higher than the same period the previous year, according to the National Grid. This price will now sit at 6.34p per kWh from January 2024.
Despite these expensive figures, gas is actually cheaper than electricity. Check out the difference between electricity and gas prices in the table below:
| Fuel type | Average price (pence/kWh) in 2024* |
|---|---|
Gas | 6.34 |
Electricity | 24.86 |
As you can see from the table, electricity is more than three times as expensive as gas.
Unfortunately, this means that people who have taken the risk of switching to electricity in a bid to reduce emissions – for example, by installing heat pumps or buying an electric vehicle charging point – are now suffering from sky-high prices.
But renewable energy or ‘green’ tariffs offer lower prices than these, on average.
Despite electricity prices being higher than historical averages, according to The Eco Experts 2024 National Home Energy Survey, 75% of low-carbon technologies have been made in the past 12 months alone.
Want to save money on your bills? Find out which household appliances use the most electricity, and how to cut back on their energy consumption.
Why is electricity more expensive than gas?
There are two main factors increasing the price of electricity: the global gas shortage and environmental taxes.
While environmental levies have been gradually increasing the cost of electricity over time, the global gas crisis has increased prices drastically in the past year alone.
The global gas shortage
The gas market is still precarious and there are risks of future volatility. Demand for gas is increasing across the globe, and natural gas is in higher demand year on year.
New gas supplies that have entered the market are extremely limited, too, due to slow growth in LNG production. And tensions in the Middle East pose a threat to these shipments from Qatar, which account for 20% of global exports.
Gas prices are exploding across Europe, which is partly due to lack of supply from Russia, as well as an increase in demand around the world. This shortage has increased the price of gas, which is having a knock-on effect on electricity costs.
Depending on where you are in the UK (whether you live in Scotland, England, Wales, or Northern Ireland), the energy mix generating your electricity will be different. But overall, the nation’s energy mix is heavily dependent on fossil fuels – mainly natural gas. For context, from September 2021 to November 2021, gas was used in 41.9% of the UK’s electricity generation.
Although, this is slowly changing, as the UK explores more renewable energy options. This is due to the UK’s 2050 net zero goals.
Environmental taxes
The UK government has imposed an ‘environment and social obligation’ tax on electricity over the past decade. The money gained through these levies goes towards funding renewable energy production across the UK, which helps reduce emissions but pushes up the price of electricity.
See below to find out how the costs of gas and electricity are broken down.
Data from Ofgem
The wholesale costs of electricity, as a percentage of the total price, are lower than for gas.
For electricity, it’s mainly the environmental taxes that make it more expensive, despite it being the more environmentally friendly option for customers to use. Since electricity uses renewable technology, such as wind and solar, those charges are applied to it instead of to gas.
However, in October 2022, the government temporarily suspended environmental levies on residential electricity bills, shifting the cost onto the government instead.
Ofgem stated the price of wholesale energy (both gas and electric) has actually decreased over time – we’re just having to pay for extra things on top. Check out the chart below to see how the price of gas and electricity has evolved over time:
Data from Ofgem
Is the difference going to get even bigger?
The difference between gas and electricity prices have been relatively similar, despite prices once again on the rise since October 2024.
Dale Vince, the founder of Ecotricity, was one of many to suggest that gas suppliers should face a windfall tax (charges on the excess profits of privatised utilities), as many private suppliers have seen profits increase massively during the energy crisis.
In fact, UK North Sea oil and gas companies are set to report near-record cash flows of almost £14.9bn for the current financial year, and Shell has increased its profits nearly 14-fold.
If these companies were to pay a windfall tax, the profits could help fund renewable energies and take the edge off the price of electricity.
The public supports this idea too, with 74% of all people backing a windfall tax – including 84% of respondents who voted Conservative in the 2019 General Election.
However, former prime minister, Liz Truss confirmed there would be no windfall tax on energy companies’ excess profits under her government.
Is electricity more expensive than gas in other countries?
Energy costs vary a lot around the world, depending on supply and demand issues and the energy mixes powering different grids.
However, many nations are facing similar challenges to the UK – high energy prices, with electricity being much more expensive than gas. We’ve listed a few examples below.
France
Nuclear power is a key source of electricity in France, which means the average electricity price there is one of the cheapest in Europe (nuclear has very low running costs and a long lifespan, so it’s particularly cost effective in the long term), standing at around 17.3p per kWh. Although gas still costs as little as 5p per kWh, it had a record 12.6% increase during the winter months of 2021.
Germany
According to the German Association of Energy and Water Industries (BDEW), by the end of 2021, the average price of electricity for households in Germany stood at 32.16p per kWh.
As for gas? In December 2021, Germans were paying an average of $0.16p per kWh for gas.
America
As it stands, Americans pay an average of 4p per kWh for gas. The US electricity price averages $1.38 per kWh – 3.8% higher than in 2021. Both of these energy prices are significantly cheaper than in the UK.
Australia
On average, Australians pay 23.6p per kWh for electricity. But remember, Australia is a big place, which means electricity rates vary from state to state – and even within different parts of the same state.
Similar to the UK, while electricity prices are pretty steep in Australia, gas comes at an average of 10 cents per kWh.
Summary
- The UK isn’t the only country deadline with big price differences between electric and gas
- Those who turned their backs on fossil fuels are now paying a heavy price for their commitment
- If we want to beat climate change, we need to find ways to make electric more affordable for households around the UK – and the rest of the world, for that matter
- The wholesale costs of electricity, as a percentage of the total price, are lower than for gas
- Gas and electric prices have risen in the UK by 11.2% between October and the January energy period
