Public procurement of electricity could save GB households £200 a year, says thinktank

Government plan to de-link gas and electricity prices aims to reduce bills for consumers after global surge in prices

Households in England, Scotland and Wales could save nearly £200 a year on their energy bills if the government stepped into the market to act as the sole buyer of electricity, according to a thinktank.

The research found that public procurement of electricity, meaning the government would become the “single buyer” of power before it is resold to consumers, could shave billions of pounds from electricity prices.

Currently, power prices to consumers are set by the cost of gas, which can be highly volatile. Average energy bills are to rise by more than £200 in July because of the impacts of the Iran war, which has driven up gas prices.

Although the UK’s increasing use of cheaper renewable energy should bring prices down, the current structure of the market allows gas generators to set the wholesale price for all so consumers do not feel the benefits.

In a report for thinktank Common Wealth, Donal Brown, a senior researcher in energy policy and political economy at the University of Oxford, said: “Britain’s electricity market was designed for a fossil fuel age and it’s now a key barrier to a lower cost, low-carbon future.”

“Gas still sets the price for 80% to 90% of the time, while generating only a quarter of our power. This funnels billions in windfall profits to private generators, while UK homes and businesses pay some of the highest bills in the world,” Brown said.

The government is under growing pressure to tackle the cost of electricity after the war in Iran caused a global surge in oil and gas markets, creating the second energy price shock in four years.