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 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.
What’s on this page?
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 10.3p 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 type | Average price (pence/kWh)* |
|---|---|
Gas | 10.3 |
Electricity | 34 |
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.
This is also likely the main reason behind 43% of Brits being reluctant to purchase green technology, according to our 2023 National Home Energy Survey.
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. 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 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, from October 2022, the government will temporarily suspend environmental levies on residential electricity bills, shifting the cost onto the government instead.
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?
The difference between gas and electricity prices won’t increase for UK households until at least October 2024, as energy prices will be frozen until then.
However, the cost of this freeze is likely to fall on the taxpayers, in one way or another.
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 £14.9 billion 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, Prime Minister Liz Truss has confirmed there will 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
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.
