Ripped Off: How UK Homeowners Are Paying Gas Prices for Wind Energy
It’s 2025. You can whip out your smartphone, open an app and see exactly where the UK’s power is coming from in near real-time. Wind turbines are spinning, solar panels are soaking up rays, hydroelectric is pumping and renewable energy is surging into the grid. So why on earth are UK homeowners still paying electricity prices dictated by gas – the most expensive fuel? It’s ridiculous, outdated and flat-out unacceptable.
The Marginal Pricing Model: A System Stuck in the Past
The UK’s marginal pricing model, a relic from the privatisation of energy companies in the late 1980s, determines electricity prices based on the costliest fuel used to meet demand within any half-hour period – almost always gas. Even if renewables generate the bulk of the power during that time, the price is still almost always dictated by gas. In effect, consumers are paying for the most expensive option, regardless of whether cheaper, cleaner energy sources made up the majority of the electricity supply.
This outdated and unfair pricing system might have been justifiable in the past, but today? It’s a slap in the face for homeowners, especially those who have made the effort to adopt sustainable heating systems like heat pumps, only to find themselves penalised by a model that ignores the reality of the energy mix.
Renewables Are Cheaper – But We’re Not Seeing the Benefits
Renewable energy sources like wind and solar are now cheaper to generate than fossil fuels. As of 2024, over 40% of the UK’s electricity came from renewables. Yet, thanks to the marginal pricing model, we’re not reaping the rewards of this cleaner, more affordable energy. Instead, renewable generators are paid the same inflated rates as gas suppliers, and we, the consumers, are footing the bill.
Real-Time Data Proves This Model Is Outdated
Apps and websites already show us exactly how much electricity is being generated from renewables versus gas at any given time. Why can’t our billing reflect this? Instead, we’re stuck with a pricing model that lumps cheap and clean energy together with expensive fossil fuels. It’s a lazy, one-size-fits-all approach in a world where customisation and precision have become the norm.
Electricity generators, including those using renewables, benefit from inflated prices due to the marginal pricing model. This allows companies to rake in profits while households bear the brunt.
The Spark Gap: Penalising the Sustainable Choice
To make matters worse, electricity is burdened with levies and taxes that are ostensibly intended to support the renewable energy transition. Meanwhile, gas remains comparatively cheap, creating a significant spark gap that actively discourages homeowners from switching to electric heating systems like heat pumps. While we acknowledge that addressing this imbalance won’t be a politically easy decision (given that so many homes in the UK still rely on gas) a solution must be found. Leaving this disparity unchecked undermines the government’s own climate goals and punishes those trying to make greener choices. It’s not just bad policy; it’s a glaring failure of leadership.
Why This Must Change
The UK government needs to scrap the marginal pricing model and adopt a fairer system that reflects the real costs of energy generation. Here’s what must happen:
- Real-Time Billing: Use existing technology to charge consumers based on the actual mix of energy sources being used.
- Fair Levies: Shift green levies from electricity bills to gas bills to encourage cleaner energy use.
- Price Transparency: Make it clear to consumers where their money is going and why.
UK homeowners are already struggling with rising energy costs. Being forced to pay over the odds for clean energy while being tied to an outdated pricing model is beyond unacceptable – frankly, it’s scandalous.
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Absolutely! Could not agree more - Great writeup.
Hopefully Octopus and others will continue to push for early changes.
If only Milliband would focus on important things!
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@tim441 Yes, Yes, Yes, Yes and …YES! We all know it, I’m sure all the individual members of all the authorities know it too! What we all don’t seem to know is … When will the appropriate decision makers move on the matter? We have paid for and have put up with this madness for long enough! Regrets, Toodles.
Toodles, he heats his home with cold draughts and cooks his food with magnets.
I agree. The problem might be the number of smart meters that don’t work. I am on my 4th and have to keep asking octopus to ask DDC for missing data . Hardly a good technology. I have no problem seeing usage using all
other apps
The problem might be the number of smart meters that don’t work. I am on my 4th and have to keep asking octopus to ask DDC for missing data
Erm... This going off at a tangent, but I'm still interested to learn about your experiences.
Could you please do one of the following:
a: re-post your comment at the end of this existing topic about Smart Meters
b: start a new topic with a general title such as "Smart Meter failure"
because that will attract others to the discussion in future.
Thanks.
Save energy... recycle electrons!
As a post thought, I suppose one very good reason to not ‘shake the boat’ is that the ‘energy UK gravy train’ has some very satisfied travellers on it and they would see no good reason to make changes resulting in a fairer and more equitable system for all the consumers. ‘Don’t rock the boat’ and all that.
I would like to think that Greg Jackson et al can curry enough support amongst the rest to move and shake some sense and fairness into the whole structure. Am I hoping for too much I wonder? Toodles.
Toodles, he heats his home with cold draughts and cooks his food with magnets.
Posted by: @toodleswould like to think that Greg Jackson et al can curry enough support amongst the rest to move and shake some sense and fairness into the whole structure.
It's commonly the case that we expect to 'win an argument' by force of numbers.
But in this case, I don't think that's the crucial factor.
Government policy is to attain decarbonisation of the electricity grid by 2030.
That's the target which NESO is tasked with implementing.
At some point GB will have to remove the wholesale price of gas from being the basis on which the electricity market operates.
Those of us who have sufficient understanding of the issue can put forward proposals to DESNZ and Ofgem as to the steps required for NESO to hit that target.
Both DESNZ and Ofgem are often operating public consultations.... for which the number of respondents is depressingly low.
But that's to our advantage.
It doesn't take many of us Forum Members to submit responses in order for us to have a pretty sizeable proportion of the feedback being sought!
There's also the Commons Select Committee on Energy Security and Net Zero, who announce inquiries for which we can submit whatever (relevant) evidence we choose.
They don't currently have an open Inquiry Topic which is relevant to the electricity pricing debacle,
but they will inevitably do so at some point.
If DESNZ and Ofgem aren't making adequately large steps towards grid decarbonisation, then it's the Select Committee who hold their feet to the fire.
Save energy... recycle electrons!
@transparent Gas Fire? (sorry)
Toodles, he heats his home with cold draughts and cooks his food with magnets.
Oh my word, this is EXACTLY the discussion / argument that I have on a nearly weekly basis (actually more like a daily basis!) with ANYONE WHO WILL LISTEN.
As a totally electric household (no gas, no oil - EV, ASHP) on Agile we should be loving life and feeling quietly smug for doing what we can to help save the world by not drinking down dinojuice.
But it's costing me WAY MORE than it should! I hear people moan about their heating bills, but when I tell them that on the 10th January my electricity bill was £33 FOR A DAY they look incredulous. And if I hear someone say they're considering moving to a heat pump - I tell them not to. Not because they're not great (they are and we love ours) but because until the marginal pricing model, and the associated electricity levies, are sorted out it doesn't make ANY financial sense.
Electricity is currently 4 times more expensive than gas (6p vs 24p, except when the Agile price went to 99p per kWh. Oh, how we laughed...).
My heat pump, in the depths of winter, isn't 4 times more efficient than a gas boiler. So it doesn't take a genius to work out that I would be out of pocket compared to using a gas heating system.
My energy bill for 2024 was just under £2,500 (an average price per kWh of 16p against usage of 14,850kWh), of which heating and DHW made up about £700 of the total (about 4,140kWh during the year). So I'm very pleased with that. BUT I had to go through a steep learning curve in the preceding 4 years until I got things under some sort of control, and the 30 minute pricing structure of Agile isn't for the majority of people.
We make it work, and I'm now very proud that our energy usage in a 5 bedroom detached house in the middle of a big field (4 people, including twin 18 year old daughters who use 250l of hot water, each, TO WASH THEIR HAIR!!!!!!) is on a par with the published TDCV figures for a 3-bed semi with 3 people living there.
But those same figures project a per annum cost of £1,400 for the 3 bed semi, and I'm paying another £1,000. Same amount of energy used, £1k more spent.
How does that make any sense?
Anyway Mars, thanks for writing these thoughts out. I'm going to be sharing this on with quite a few people...
😀
May I just clarify one point made by @editor...
Posted by: @editorThe UK’s marginal pricing model [....] determines electricity prices based on the costliest fuel used to meet demand within any half-hour period – almost always gas.
Not quite.
Electricity Suppliers will first draw on electricity from generators with whom they have a PPA (Private Purchase Agreement).
That price is set by whatever terms were agreed in the contract.
Suppliers whose PPAs are able to offer them more than the forecast demand for any half-hour (HH) period can sell on the surplus to others via the European wholesale market, Exspot, or the UK agency Elexon.
When Suppliers do not have sufficient electricity to meet their demand forecast, each must buy what they require via an auction for each HH.
The auction stops 10-minutes before each HH period starts.
That gives NESO just enough time to schedule which generation sites are to supply how much electricity to the grid...
... and ensure that others are paid to be on 'standby' in case there are demand surges.
The last 'trade' of the auction is the one which sets the price for all other trades within that HH.
Yes, it is highly likely that the last trade will currently be for electricity from a gas-fired generator (CCGT).
However, it is also the nature of auctions that the price will rise during the trading period.
Those last two statements are unconnected however.
I'm going to stop at that point in order to facilitate discussion.
But I can elaborate further if you wish.
Save energy... recycle electrons!
I thought that they brought in CfD to stop this merry go round, but the clowns set the strike price too low and all the value now flows back to the generators meaning that the consumer ends up paying for over priced energy from the spot market.
Ofgem is consulting about their current work programme so perhaps we should tell them to change this system within their work plan.
“Shaping a retail market that works for consumers” Really?
“Establishing a efficient fair and flexible energy system” Really?
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