Why is Electricity Still Priced Like Gas… When We Barely Use It on some days?


 Why is Electricity Still Priced Like Gas… When We Barely Use It on Some Days?

The Curious Case of Expensive Electricity

Here’s a statistic that surprises most people:

At times, gas can generate as little as ~4% of UK electricity
Yet… gas often sets nearly 100% of the electricity price

That sounds like madness. But there is a reason — and once you understand it, you might still think it’s madness… just organised madness.

The Key Idea: “Marginal Pricing”

The UK electricity market works on something called marginal pricing.

In simple terms:

  • Electricity is generated from multiple sources:
    • Wind (cheap)
    • Solar (very cheap)
    • Nuclear (steady cost)
    • Gas (expensive)
  • The grid uses the cheapest sources first
  • BUT… the price everyone gets paid is set by the last (most expensive) power station needed

And that’s usually… gas

 A Simple Analogy

Think of it like filling a boat:

  • You fill with free rainwater (wind & solar)
  • Then use a hose (nuclear)
  • Finally… you top up with bottled water (gas 💸)

Even if you only needed one bottle,
you pay the bottled water price for ALL of it

Why This Happens in the UK

The UK energy market (run through systems overseen by organisations like National Grid ESO and regulated by Ofgem) is designed to:

  • Ensure electricity is always available
  • Encourage investment in new power stations
  • Balance supply and demand in real time

Gas plants are flexible — they can:

  • Start quickly
  • Fill gaps when wind drops
  • Stabilise the grid

So they often become the “price setter of last resort”

The Problem

This system worked… when most power came from fossil fuels.

But today:

  • Renewables are often the majority
  • Their cost is near zero once built
  • Yet consumers still pay gas-inflated prices

So cheap green energy doesn’t always mean cheap bills

Is This Changing?

Yes — and it’s a hot topic.

The UK government and energy experts are looking at:

1. Splitting the Market

  • Separate pricing for:
    • Cheap renewables
    • Expensive gas backup

2. Contracts for Difference (CfDs)

  • Already used for wind farms
  • Fixes a stable price regardless of gas spikes

3. Zonal Pricing

  • Different electricity prices by region
  • Reflects local supply (e.g. windy Scotland vs London demand)

The Bigger Picture (Going Green Insight)

Here’s the irony:

We’ve built a system where clean energy is cheap
But our pricing model hides that benefit

It’s a bit like owning a solar-powered boat…
…but paying marina fees based on diesel prices.

Blog Closing Thought

Standing on the river, watching the wind fill the sails, it feels gloriously free. No meter ticking. No gas bill arriving later.

Yet back at home, that same wind is spinning turbines — producing some of the cheapest electricity we’ve ever had — and somehow we’re still paying gas prices for it.

Perhaps it’s time the system caught up with the science… and the sails.

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