Electricity prices may be decoupling from gas

Electricity prices may have begun their long-awaited decoupling from gas prices, according to research.

Although wholesale gas prices are rising and driving up inflation, electricity prices are increasing much more slowly.

Andrew Sissons, director of sustainable future for research and innovation foundation Nesta, said this is an unusual pattern in Britain as gas and electricity bills are normally closely linked.

He said the Contracts for Difference support scheme, used to guarantee a fixed price for renewable energy, has been the key agent of decoupling.

“With a growing share of electricity covered by CfDs - and with newer, cheaper renewable CfDs coming on stream - this causes overall electricity prices to rise by less than gas prices,” he said.

However Sissons said the decoupling could still become a liability as if gas prices were to fall significantly electricity prices should not be expected to follow as electricity is increasingly a fixed cost system, dominated by the cost of building renewables and the electricity grid.

He said the Government should now look to further reduce the fixed costs of electricity and encourage more people to switch to clean heating and transport.