- Electricity prices increased to 24.85p per kWh from January 2025
- On a kWh-to-kWh basis, electricity costs nearly 4 times more than gas
- This gap between gas and electricity is known as the ‘Spark Gap’
- It is a key barrier to the adoption of low-carbon technology, like heat pumps
- Two main factors affecting the price of electricity are the global gas shortage and environmental taxes on electricity
If you pay for your energy at home on a ‘dual fuel’ basis, you may have noticed that there is a significant difference in the kWh cost between gas and electricity.
At the time of writing, the price of gas 6.34 pence per kilowatt hour (kWh), while electricity costs 24.86 pence per kWh – almost four times as much. But why is this?
Another reason is that green levies are added to our electricity bills, but not to our gas bills.
In this article, we look at some of the reasons why electricity is more expensive than gas, and how UK energy prices compare to those around the world.
Why does electricity cost more than gas?
At present, the cost of electricity is primarily dictated by the price that gas-fired power stations need pay for natural gas to generate electricity for the grid.
According to the International Energy Agency (IEA), about a third of the UK’s electricity in 2023 was still generated by the burning of natural gas. As power stations buy natural gas at wholesale market prices, electricity prices are at the mercy of price shocks, as we have seen since Russia invaded Ukraine.
As gas generators can quickly burn more or less to match temporary spikes in demand, they are still an important part of the UK’s energy mix, particularly on days when weather conditions do not allow for the sufficient generation of renewable electricity.
Another factor that works its way into the cost of your electricity bill is the taxes and levies that are payable on electricity.
Environmental taxes and levies
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.
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
Unfortunately, this means that people who are trying to transition away from fossil fuels 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.
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.
Is electricity more expensive than gas in other countries?
Energy costs vary 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.
The graphic below from Household Energy Price Index shows a comparison of electricity and gas prices across Europe in January 2025:
As you can see, the UK price in c€/kWh is at the more expensive end for electricity, but not quite at the levels seen in Germany, at 40.42 c€/kWh.
Meanwhile the price of gas in the UK is at the lower end when compared to the prices paid in Sweden, at 33.27 c€/kWh.
Summary
- The UK isn’t the only country with big price differences between electric and gas
- The wholesale costs of electricity, as a percentage of the total price, are lower than for gas
- 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
