The UK government announced a review of the UK electricity market on Monday, looking for measures to reduce costs for customers dealing with rising energy prices.
Proposals for first consultation include possible modifications to the wholesale electricity market in an attempt to prevent unpredictable gas prices from determining electricity costs when renewable energy is substantially cheaper.
“We’ve just seen the price of offshore UK wind power fall to an all-time low, and gas is a shrinking portion of our electricity generating mix,” Business and Energy Secretary Kwasi Kwarteng said in a statement.
Under the existing system, the cost of generating electricity from gas-fired power plants is often used to calculate the wholesale electricity price, which helps to decide how much individuals pay for their energy.
Gas prices in the United Kingdom and Europe have risen dramatically in the last year, reaching record highs after Russia’s invasion of Ukraine and worries that Russian gas supplies to Europe might be severely limited.
Wholesale benchmark Gas prices in the United Kingdom are around three times higher than a year earlier, driving up wholesale power costs by a comparable amount.
The limit on the most commonly used family energy contracts climbed by 54% in April, owing mostly to rising gas costs. When the next limit level is implemented in October, this is likely to increase by 60%, bringing typical household annual dual fuel expenses to more than 3,200 pounds ($3,829).
The government also said that it would consider giving incentives to customers to utilize energy when demand is low or when wind or solar power is abundant.