When events in the Middle East dominate the headlines, the first concern is rightly for the people whose lives are being torn apart. But there’s another, quieter consequence: every time there’s instability in a major producing region, the price of oil and gas jolts. And when those prices move, so do bills.
We’ve been here before. After Russia’s invasion of Ukraine, gas prices rocketed. Because gas still sets the power price much of the time, energy bills quickly followed. British households paid three times over – first in their gas bills, then on their electricity and then with the inflation hit. As long as we rely on fossil fuels priced on global markets, we are downstream of other people’s decisions.
Looking out two years, it’s the same story. Countries leaning hardest on gas are expected to see the biggest pressure on energy prices. By contrast, countries that spent the last decade building a broader mix of renewables and fixed cost generation are forecast to face much smaller impacts.
Look at Spain. Its power prices have stayed relatively low because renewables now do most of the heavy lifting and gas only sets the price around 15% of the time.
This is the crux of it. Systems that rely heavily on gas are more exposed to price swings. Systems built around renewables, storage and low-carbon power are simply more stable.
How a clean, homegrown energy system can keep costs down
We’re starting to see the benefit here too. The UK’s investment in renewables is already acting as a buffer. Without the renewables already operating on our system, we estimate wholesale electricity prices today would be around 30% higher.
For two brief periods in the last two weeks, renewables supplied almost all of Britain’s electricity – breaking records and squeezing gas to about 2% of generation. It was two brief moments but showed what’s possible in a system where home-grown power does the heavy lifting, and gas plays a supporting role.
None of this means a system powered by British home-grown electricity will be cost free. Building offshore wind farms, strengthening the grid, adding storage and flexible generation all requires serious capital. But there’s a big difference between paying for long-term investment and being buffeted by short-term fuel shocks. In the first case you largely know what you’re paying for the next 20 or 30 years. In the second, you find out when you open the next bill.
Energy is an input cost to almost everything in the economy – food, manufacturing, transport, construction. When prices spike, inflation follows, interest rates stay higher and businesses hesitate to invest. Offshore wind, hydro and other renewables aren’t just climate policies. They’re economic insurance policies: once built, their costs are mostly fixed, reducing risk for everyone.
Electrification goes further. Today, households juggle three separate costs: fuel for the car, gas for heating and electricity. As we increasingly switch gas for power, those costs converge into a single system increasingly driven by cheaper, cleaner, more secure home-grown electricity. We move from importing vast quantities of fuel to retaining more value at home.
There’s a lingering claim that cleaner power means higher prices. The evidence points the other way. The Climate Change Committee has stated a shock like 2022 could cost as much as the entire additional cost of reaching net zero by 2050. In a volatile world, avoiding the transition is the riskier, more expensive option.
There is no easy alternative. New gas-fired power plant costs more than three times what it did when Britain last built a station and, while nuclear is important, it’s slow and expensive to deliver.
None of this removes the need to support those struggling today. If this crisis deepens, targeted help will remain essential, with a strong case for funding it through means-tested taxation and not bills.
Britain faces a simple choice: continue relying on volatile global fuels, or finish building an energy system that keeps costs down by design with clean, home-grown electricity. The answer is clear – let’s finish the job.
Originally posted on The Times website.