Expensive gas drives almost 90% of UK electricity‑bill rise, Nesta analysis shows
New Nesta figures reveal that soaring wholesale gas prices account for the bulk of the increase in UK household electricity and gas bills since 2020.
Wholesale gas prices at the heart of the bill surge
Analysis from the think‑tank Nesta, shared with Carbon Brief, finds that the steep rise in UK household electricity bills since 2020 is almost entirely driven by higher wholesale gas costs. After adjusting for inflation, a typical annual electricity bill rose by £180 by the fourth quarter of 2026 compared with the same period in 2020. Of that increase, about £161 – roughly 90% – is linked to wholesale costs, which are dominated by the price of gas.
Wholesale gas prices on 19 October were 220 pence per therm (£75 per megawatt hour), a level above the 2022 average of 210 pence per therm (£72/MWh). The same analysis shows that 77% of the £368 real‑terms rise in household gas bills since 2020 (£283) is also due to wholesale gas prices.
Other bill components and their impact
Renewable “contracts for difference” (CfDs) are actually reducing electricity bills by about £17 under the current price cap, according to Nesta. Government policy changes – moving 75 % of legacy renewable support onto general taxation, ending the “ECO” efficiency scheme and temporarily removing VAT – have also cut policy costs for electricity.
Network costs have added £72 to a typical bill since 2020, with £46 of that amount going to investment in the electricity transmission network (the “motorways” of the grid). Balancing costs, including constraint payments for curtailing wind farms and running gas plants, contribute only £21 of the rise.
Supplier operating costs have risen by £46 since 2020, a figure not broken down in Ofgem data but thought to reflect higher household energy debt. Supplier profits remain capped at 2.5 % of bills.
Net‑zero versus gas price narratives
Andrew Sissons, Nesta’s director for sustainable future, says the data “firmly contradict” the narrative that the UK’s net‑zero target is to blame for high energy bills. He argues that net‑zero is actually shielding Britain from the full impact of expensive gas, noting that over 80 % of households are connected to gas mains while the electricity system still relies heavily on gas as the marginal unit.
The analysis also notes that household electricity prices have risen less sharply since the Hormuz crisis, as higher clean‑energy generation has helped decouple electricity costs from gas price spikes.
Overall cost picture for dual‑fuel households
When both electricity and gas are considered, a typical household’s annual dual‑fuel bill grew from £1,175 in October 2020 to £1,723 in October 2026 – a 47 % rise in real terms. Wholesale cost increases driven by gas account for £444 (81 %) of that total increase, while network costs add £127.
These findings come after the UK government approved development of the Jackdaw gas field in the North Sea, despite assurances that the project would not affect prices.
In sum, the Nesta analysis attributes the overwhelming majority of recent UK household energy‑bill growth to soaring wholesale gas prices, while renewable support mechanisms and network investments play comparatively smaller roles.
