Why Is UK Electricity So Expensive?

UK electricity prices are among the highest in the world, driven by reliance on imported natural gas, green levies, and marginal pricing. Despite some predicted reductions, prices will continue to rise in 2025, while many households are already struggling with increased energy costs. This article breaks down the main factors behind the high prices and explores the predictions for what will come. We’ll also explore the best ways to lower your bills, from switching suppliers and improving insulation to investing in solar panels and battery storage solutions so you can start saving money.

A significant portion of the UK's electricity grid relies on natural gas, and the price of gas, which is influenced by international events and global market forces, is a major driver of electricity costs. Apart from international gas price fluctuations, the UK also has limited storage capacity for gas, making us particularly vulnerable to price spikes and supply disruptions. 

Other factors causing high prices include an ageing grid and infrastructure, marginal pricing based on the most expensive source (gas), and green levies and other taxes, which are being used to upgrade the grid and expand infrastructure for renewable sources to reduce our dependence on the volatility of natural gas.

This is why the UK government tightly controls the energy price cap to limit price volatility as much as possible. According to the UK Parliament, the record prices of 2022 would have led to an 80% increase without government intervention. Instead, the Energy Price Guarantee limited that increase to 27% in October 2022.

Here are the major government policies and market forces that cause the most significant impacts on UK electricity prices.

International events are the most significant factor in rising UK electricity prices since we heavily depend on imported fossil fuels for energy. For instance, the Russia-Ukraine conflict recently led to a 12% surge in gas prices in January 2025 due to disrupted exports, which increased competition and drove up global prices.

The instability in the Middle East also drives prices up, resulting in a 4% increase in crude oil prices in late December 2024. International energy policies, including increasing restrictions on drilling or Western sanctions imposed on Russia and other factors worldwide, also impact global fossil fuel prices.

The UK also has less natural gas storage infrastructure than most of Europe, making us particularly vulnerable to these price spikes and shortages. As global prices rise, so does the cost of electricity.

The UK uses green levies, an environmental and social obligation tax on electricity, which increases the cost of electrical power by about 16%. These green levies are essential to fund renewable energy and other environmental schemes to reduce emissions but also reduce our dependence on the volatile pricing of natural gas, our most expensive electricity source in the UK.

While UK consumers are feeling the cost now, in the long term, reducing emissions and our reliance on imported fossil fuels will result in a more stable, cheaper, and sustainable long-term power supply. These green levies also explain why electricity is so much more expensive than gas since green levies only account for 5.5% of the gas prices in the UK.

UK electricity prices use a marginal pricing system, where the price is set based on the most expensive energy generator, typically natural gas. Also, the UK doesn’t use zonal pricing, so if there’s a surplus of cheap power in one area—for instance, if they use lots of solar or wind power—the price remains high since it's based on the national average.

Yes, energy prices are still rising in the UK, rising nearly 6.5% on 1 April 2025. While this is expected to decline by less than 1% in July, it is expected to increase again by more than 1% on 1 October 2025. Overall, we expect about a 7% increase in electricity prices in 2025.

Here are some of the best ways to help you cut your electricity bill.

Start by shopping around for different power suppliers in your area. See if any suppliers offer better tariff rates than you are currently getting. Ask each provider what tariffs they offer to find one that best suits your electricity use.

About 40-50% of the average home’s energy bills are used for heating and cooling. Poorly insulated homes lose significant energy through heat loss through walls, roofs, doors and windows. Improve the insulation in your loft and walls, replace old single-glazed windows with double-glazed ones, and ensure a good seal around all your doors and windows.

Invest in new, more efficient models if you have old appliances with an energy efficiency rating of “C to G”. When shopping, look for those with the most efficient “A” rating instead.

If your home does not yet have a smart meter, ask your provider for one. If you live in England, Scotland, or Wales, the government requires suppliers to provide them, so there should be no upfront cost to pay. Smart meters will allow you to monitor your power use better so that you can see in near real-time how much energy you are using. This is especially helpful for those switching to time-of-use tariffs, where you get better rates late at night during off-peak hours but higher rates during peak usage. 

One way to maximise savings on time-of-use tariffs is to use battery storage like EcoFlow Power Ocean (Single-Phase) during peak hours and then recharge your batteries late at night during off-peak hours, or better yet, with clean, free energy from the sun using solar panels.

Using renewable energy like solar reduces your electricity bill, often significantly, depending on the system that you have. However, those who only have panels are probably not saving as much as they could. This is because the sun shines during the day when most of us are at work and school. Even if you sell excess electricity back to the grid, the payment rates are usually much lower—often significantly lower—than the price you pay to buy electricity from the grid. You can maximise your savings by installing battery storage with your panels. 

If you already have solar panels, you can easily retrofit your current system with battery storage by installing the EcoFlow PowerOcean DC Fit. This allows you to add batteries without changing anything in your current system. Then, you can add the EcoFlow Power Ocean (Single-Phase) battery storage, which starts at 5kWh, is expandable up to 45kWh, and comes with an impressive 15-year warranty. 

This allows you to use solar when you get home from work, during peak tariff hours, at night, and during bad weather when your panels are not producing as much. If you have or are switching to more efficient three-phase electricity, you can also buy the EcoFlow Power Ocean (Three-Phase), which is designed to work perfectly with this higher-power system.

Despite some falling prices from 2023-2024, typical bills in 2025 will still be 52% higher than in winter 2021/22. We expect a minimal decrease in the summer of 2025, but this is not likely to lower bills by much, and with the dependence on international events, there is no guarantee it will fall at all. Prices are also expected to increase again in October. 

The long-term projections are also not promising. The UK Parliament states there is “little immediate prospect of savings from fixed tariffs or substantial further cuts in the price cap.” Instead, it urges people to improve their property's energy efficiency to reduce their power bills.

Almost. The UK has the world's 4th highest household electricity prices, only cheaper than Germany, Belgium, and Ireland. However, since the price cap does not affect industrial users, the UK has the world's most expensive industrial electricity prices.

The UK pays a lot for electricity due to a heavy reliance on natural gas, which is strongly affected by international events. Green levies are also used to invest in renewable energy as we try to reduce our dependence on the volatile pricing of global fossil fuels.

Rising electricity costs in the UK are primarily due to global energy market instability, green levies, and marginal pricing. While small price dips are expected, overall costs will remain high in the foreseeable future. The best way to manage your bills is to improve energy efficiency, switch to smarter tariffs, and invest in renewable solutions. Battery storage like the EcoFlow Power Ocean (Single-Phase) should be considered to maximise savings and reduce reliance on expensive grid electricity. When you take action now, you can secure a more stable and cost-effective energy future.