Introduction
As the UK pushes forward with its environmental targets, consumers are increasingly encouraged to switch from traditional gas boilers to electric heating solutions such as air-source heat pumps and electric boilers. However, the steep cost of electricity compared to gas may prove a significant roadblock to this transition.
Rising Energy Costs: A Historical Perspective
Over the past decade, electricity prices in the UK have surged dramatically. In 2015, electricity prices averaged around £50 per megawatt-hour (MWh). By 2021, this had risen to £70/MWh. The energy crisis of 2022 caused an unprecedented spike, with electricity reaching a staggering £580.55/MWh in September. While prices have since stabilized, electricity remains costly at approximately £143.37/MWh in early 2025.
Meanwhile, gas prices have followed a similar, albeit less extreme, trajectory. From an average of 50 pence per therm (p/th) in 2015, prices rose to 70 p/th in 2021 and spiked to 800 p/th in March 2022. As of early 2025, gas prices have settled at approximately 123.02 p/th — still markedly cheaper than electricity on a per-kilowatt-hour basis.
Why Are UK Consumers Paying More for Electricity?
UK consumers face higher electricity prices compared to much of Europe. In the first half of 2023, UK electricity prices were 27% above the EU average, while gas prices were 22% lower than the EU average.
In 2024, renewable energy sources played a significant role in the United Kingdom’s electricity generation. Wind energy emerged as the leading source, contributing 30% to the energy mix, surpassing gas, which accounted for 26.3%. Collectively, renewables, including wind, solar, hydroelectric, and bioenergy, generated 37% of the UK’s electricity, marking a pivotal shift towards cleaner energy sources
Electricity is generally more expensive than gas in the UK due to several key factors, including production costs, infrastructure, and policy decisions. Here’s a breakdown of the main reasons:
1. Cost Structure and Market Dynamics
Gas Pricing: Gas prices are closely tied to wholesale market conditions. Although gas prices surged during the energy crisis, they tend to remain lower due to cheaper extraction and lower distribution costs.
Electricity Pricing: Electricity generation often involves multiple energy sources, including renewables, nuclear, and gas. Even when cheap renewables are available, wholesale electricity prices are still influenced by the marginal cost principle — meaning the most expensive energy source (often gas-fired plants) sets the market price.
2. Grid and Infrastructure Costs
The electricity grid requires substantial investment to ensure stability, especially as renewable energy capacity expands.
Maintaining infrastructure to balance supply and demand, especially with intermittent renewable sources like wind and solar, adds additional costs.
3. Environmental Levies and Taxes
The UK’s green energy policies place a higher burden on electricity bills than gas bills. Levies such as the Renewables Obligation (RO) and Contracts for Difference (CfD) are added to electricity costs to fund the transition to low-carbon energy.
Gas, which remains a significant source of carbon emissions, currently faces fewer environmental levies, keeping its cost lower.
4. Renewable Energy Integration
While renewable energy is now a major source of power, integrating wind, solar, and other renewables into the grid requires investment in storage, backup power systems, and network enhancements — costs that are passed on to consumers.
5. Legacy Fuel Dependency
The UK’s gas supply network is well-established and efficient, making it relatively inexpensive to distribute gas. By contrast, the expansion of the electricity grid to accommodate renewables requires ongoing investment, which inflates costs.
This imbalance has made the transition to electric heating solutions less attractive to homeowners.
Energy Consumption Trends in the UK
Electricity consumption in UK homes has declined steadily, falling below 100 terawatt-hours annually since 2022 — levels not seen since the 1990s. This is largely due to improved energy efficiency measures such as light bulbs, tvs, washing machines etc. Conversely, gas consumption has remained relatively stable, reflecting the continued dominance of gas boilers in UK households.
How Pricing Impacts the Green Heating Transition
The UK’s ambitious net-zero targets rely heavily on consumers replacing their gas boilers with electric alternatives like air-source heat pumps, electric boilers and electric radiators. However, with electricity still significantly more expensive than gas, consumers are hesitant to make the switch. Higher operational costs for electric heating systems present a substantial financial burden for homeowners, limiting the adoption of eco-friendly heating technologies.
What Can Be Done to Drive Change?
To overcome this challenge, industry experts suggest several potential solutions:
- Electricity Price Reform: Introducing policies to reduce electricity costs, such as shifting renewable energy levies away from electricity bills and toward gas bills, could help close the price gap.
- Gas Price Reform: UK gas prices are artificially too low and are damaging the attractiveness of investing in renewable electricity.
- Consumer Incentives: Expanding grants and subsidies for heat pump installations could offset upfront costs and encourage adoption.
- Changing building regulations and EPCs: make it clearer to the consumer that as renewable electricty becomes an ever higher proportion of electricity generated then increased usage in the home and by transport is better for the environment.
- Renewable Energy Growth: Increasing investment in wind, solar, and nuclear power could stabilize electricity prices over time, making electric heating a more attractive option for consumers.
Conclusion
If the UK is to meet its climate targets, policymakers must urgently address the financial imbalance between gas and electricity. Without intervention, the country’s transition to greener home heating solutions may falter, leaving both consumers and the environment paying the price.
