It has been revealed that Britons may be given respite from skyrocketing household bills as a result of government proposals to break the link between gas and electricity costs.
In the context of the current crisis, ministers plan to introduce new rules under the Energy Security Bill to restructure the UK’s energy industry.
They have promised to give Britons more protection from global energy price volatility.
The current global crisis has been exacerbated by the Ukraine conflict, which has caused gas prices to skyrocket.
Soaring gas prices have had a knock-on effect on electricity costs in the current structure of the British energy market.
However, it has been reported that the new legislation will attempt to prevent future global gas market shocks from having a similar impact on electricity prices.
However, the renovation may not be completed in time to help with soaring energy costs this winter.
Business Secretary Kwasi Kwarteng will detail reform suggestions in the coming weeks, according to The Times.
These will then be included in the Energy Security Bill, which will be tabled in the fall.
According to the publication, the measures will end the current system, which essentially determines the price of power for consumers based on the wholesale cost of gas.
Despite the fact that renewable energy accounts for more than a quarter of the UK’s electricity, the price of all electricity output is determined by the most expensive megawatt required to meet demand under existing market regulations.
This means that rising gas prices have drove up all electricity bills in recent months, despite the fact that gas power plants provide only about 40% of UK electricity.
According to energy experts, the existing market is comparable to railway passengers paying the peak-period fare for every travel.
‘In the past, it didn’t really matter because the price of gas was pretty consistent,’ a government official told The New York Times.
‘It now seems utterly insane that the price of energy is predicated on the price of gas when renewables account for a big portion of our generation.’
Ministers are also hoping that the reforms will make the market more transparent and emphasize the benefits of decarbonisation to customers.
In an article published earlier this year, Michael Grubb, a professor of energy and climate change at University College London, stated that the disparity between the lower cost of renewable energy and the ultimate electricity price was “becoming intolerable.”
‘Because renewables and nuclear will always run when they can, it is fossil fuels – and at the moment, unequivocally gas, plus the cost of CO2 pollution taxes – that set the price almost all of the time, because some gas plants are needed the majority of the time, and they won’t operate unless the electricity price is high enough to cover their operating costs,’ he said.
‘It’s similar to having to pay the peak-period fare for every train ride.’
‘Why can’t people buy power directly from renewables and avoid paying the gas and carbon costs?’
The proposed amendments are said to put a stop to windfall gains made by some electricity generators who aren’t paid under the Contracts for Difference (CfD) system.
This guarantees a fixed price for power generated by low-carbon producers.
Increased use of wind power – given at a set price – has already been predicted by the Energy and Climate Intelligence Unit to save consumers considerably more money in the event of future gas crises.
According to their calculations, if another gas crisis occurred five years from now with wholesale prices of £200 per megawatt-hour for a year, wind farms with CfDs might save £5.7 billion to £6.7 billion in a year, or £70 to £85 per family.
They went on to say that if the crisis occurred again in ten years – by which time the government hopes to have 40GW of offshore wind installed as part of its journey to net zero – CfDs for wind power could save £23 billion to £26 billion per year, or £290 to £330 per household.