Nesta: Gas Prices, Not Net-Zero, Driving UK Energy Bill Surge
A surge in wholesale energy costs driven by expensive gas is responsible for nearly 90% of the rise in UK household electricity bills since 2020, according to analysis shared with Carbon Brief by the thinktank Nesta. The figures show that wholesale gas is also behind 77% of the increase in household gas bills over the same period, contradicting the narrative that the UK’s net-zero target is to blame for high consumer tariffs.
Wholesale Gas Pressures Drive Up Household Bills
Rising gas prices have anchored household energy inflation. As of 19 October 2026, UK wholesale gas prices stood at 220p per therm, equivalent to £75 per megawatt hour. This rate exceeds the average for 2022, which sat at 210p per therm following Russia’s invasion of Ukraine.
After accounting for inflation, typical UK annual household electricity bills rose by £180 in the fourth quarter of 2026 compared to the same period in 2020. Nesta’s analysis attributes 90% of this increase—amounting to £161—directly to wholesale costs dictated by gas pricing.
Total dual-fuel bills for a typical household climbed from £1,175 per year in October 2020 to £1,723 per year by October 2026, marking a 47% real-terms increase. Wholesale cost increases driven by high gas prices account for £444, or 81%, of that overall dual-fuel rise.
Renewables and Policy Costs Offset Greater Increases
Renewable contracts for difference are currently reducing electricity bills by £17 under the active price cap. Government policy costs have also dropped, with legacy renewable support moved onto general taxation, the ending of the ECO efficiency scheme, and the temporary removal of VAT.
Government social and climate policies accounted for £183, or 16% of typical dual-fuel bills, in October 2020. By October 2026, those policy costs fell to £114, representing 7% of the total cap.
Network costs added £72 to typical electricity bills since 2020, with £46 dedicated to transmission network investments. Balancing the system, including constraint payments for turning off windfarms and turning on gas plants, accounts for £21 of that increase. Balancing costs make up £35 in total—about 4%—of an £858 annual household electricity bill.
Andrew Sissons, director for sustainable future at Nesta, states that net-zero policies are sheltering Britain from the full force of expensive gas. Britain remains exposed because over 80% of households connect to gas mains, while the electricity system still relies on gas as the marginal unit.
Chancellor May Introduce Measures to Manage Energy Expenses
Media reports indicate the chancellor may introduce measures to help households and businesses manage energy expenses during the upcoming budget on 28 October 2026. This intervention coincides with forecasts that bills will rise sharply under the January 2027 price cap, potentially jumping by as much as a quarter due to ongoing high wholesale gas valuations.