New analysis by Ember reveals that UK electricity prices have tripled in the last year, with 86% of this caused by the soaring costs of fossil gas imports.
The report found that UK power prices have tripled year-on-year from August 2020 (£36/MWh) to August 2021 (£107/MWh) – a jump of £71/MWh.
In contrast, the previous twelve months saw prices remain flat in August 2020 compared with August 2019. Fossil gas costs for electricity generation rose by £61/MWh from August 2020 to August 2021. Meanwhile, the cost of CO2 allowances for fossil gas-fired generation only increased by £9/MWh.
Generating electricity from existing UK fossil gas power plants is three times more expensive than from new onshore wind and almost twice that from new solar. Even the levelised cost of electricity (LCOE) from new offshore wind is cheaper than generating electricity from fossil gas.
Continued reliance on fossil gas for power generation has caused substantial increases in electricity bills when people can least afford it.
The report says the soaring prices are due to a combination of factors including; a cold northern hemisphere winter depleted fossil gas storage levels; increased demand and prices in Asia resulted in liquefied natural gas (LNG) shipments being delivered there rather than to Europe; global demand has risen as Covid-19 restrictions have been lifted; fossil gas imports from Russia via Ukraine have not stepped up to meet the increase in European demand. This highlights the risks associated with continued dependence on volatile fossil gas that is highly susceptible to geopolitics and global events.
The report shows with winter approaching, the escalation in gas prices looks set to continue. Plus, there’s a clear consensus that the UK must phase out unabated gas power by 2035 at the latest to achieve its emissions goals and stay on track for net zero.
Sarah Brown, Senior Electricity Analyst, Ember, said: “The soaring cost of imported fossil gas is driving up electricity prices in the UK. A more rapid and committed transition to clean electricity is the only way to avoid the volatility of fossil fuels.”
Ember say the need to switch from imported fossil gas to domestic wind and solar generation has never been more apparent or urgent.
Read the full report here.