Why Is Electricity More Expensive Than Gas?

The Eco Experts

As the world steps away from fossil fuels, everything is gradually becoming electrified. Whilst 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 last year – 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 (yes, the two fuels are very intertwined) and environmental 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.

Smart meter recording gas and electricity

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.

According to National Grid, in 2021, the UK seven-day average price of gas hit record highs in December, reaching prices of 12.8p per kilowatt hour (kWh) – over eight times higher than the same period the previous year. Thankfully, this price has fallen to 7.6p since then.

Despite these expensive figures, gas is actually cheaper than electricity. Check out the difference between electricity and gas prices in the table below:

Fuel typeAverage price (pence/kWh)*
Gas7.64
Electricity (off-peak economy 7)11.81
Electricity (on-peak economy 7)24.16
Electricity (standard rate)20.06

Data from Energy Saving Trust*

*Energy Saving Trust updated these figures in November 2021, and used them to project fuel prices for 2022.

As you can see from the table, electricity is nearly 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 – are now suffering from sky-high prices.

Why is electricity more expensive than gas?

There are two main factors increasing the price of electricity: the global gas shortage and environmental taxes. Whilst 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

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

As the price of gas is increasing, electricity is subsequently becoming more expensive.

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 price of electricity is actually a lot cheaper than gas, and so are the running costs. It’s mainly the environmental taxes that make electricity 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 September 2021, the UK government stated that it was considering moving environmental taxes in residential electricity bills to residential gas bills – so this might change in the near future.

Ofgem states that 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?

Although it’s unclear whether the difference between gas and electricity prices will increase, energy prices in general are predicted to continue rising for another two years.

In a bid to make energy more affordable for households, some energy companies have suggested that the government drop environmental levies. However, this would mean that the UK could not use that money to invest in renewables, which would make the nation even more dependent on fossil fuels. However, in such a case the government could still invest in renewables using a different pot of money.

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 some 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 £14.9 billion for the current financial year. Plus, on the same day the energy price cap rise was revealed, it was announced that Shell has increased its profits nearly fourteen-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.

Solar panels and wind turbines

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

Electricity: 17.3p per kWh
Gas: 5p per kWh

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

Electricity: 32.16p per kWh
Gas: 9.7p per kWh

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 9.7p per kWh for gas. 

America

Electricity: 14.2p per kWh
Gas: 4p per kWh

As it stands, Americans pay an average of 4p per kWh for gas. The US Energy Information Administration has forecasted that the US electricity price will average 14.2p per kWh in 2022 – 3.8% higher than in 2021. Both of these energy prices are significantly cheaper than in the UK.

Australia

Electricity: 23.6p per kWh
Gas: 5.6p per kWh

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, whilst electricity prices are pretty steep in Australia, gas comes at an average of 5.6p per kWh.

Next steps

It seems the UK isn’t the only country dealing with big price differences between electricity and gas.

This needs to change. 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 electricity more affordable for households around the UK – and the rest of the world, for that matter.

Beth Howell Senior Writer

Beth has a real passion for green living. She’s been absorbed in eco research for over three years, and has become quite the expert. Whether you’re after a new set of solar panels, a home energy improvement, or you want to catch the latest eco news, she’s got your back.

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