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A new report from the UK Energy Research Centre (UKERC) sets out practical reforms that could reduce UK electricity bills. Renegotiating for the subsidies for older renewable schemes or moving remaining policy costs into general taxation could deliver significant savings on energy bills. These are among several potential reforms highlighted in The Cost of Electricity in the UK: Drivers, Challenges and Opportunities for Reform, which examines how electricity bills have changed over the past decade, and are likely to change up to 2030, and identifies practical opportunities to lower costs for consumers. 

The research finds that average annual domestic electricity bills increased by around £325 in real terms between 2015 and 2025. This decade of rising UK electricity bills has primarily been driven by increases in gas-linked wholesale fuel prices and older renewable energy subsidies – a combined 51% of overall increase – with policy costs representing 26% (£85) and wholesale fuel representing 25% (£81) of this growth respectively. Due to the energy crisis following the war in Ukraine, increasing wholesale fuel costs represented two thirds (66%) of growth in bills since 2021, having not returned to pre-crisis levels. Policy costs saw incremental year-on-year growth over the 2015 – 2025 period. Government intervention in April 2026 addressed a large proportion of these policy costs, reducing bills by £88 on average for households.  

To help decouple gas and electricity prices and address policy costs on bills, UKERC has advocated in favour of ‘Pot Zero’ – an intervention which allows low carbon generators in receipt of the Renewables Obligation (RO) to voluntarily pivot onto Contracts for Difference (CfD). In April 2026, Government announced it would be introducing a variation of this – a wholesale price Contract for Difference (WCfD) – which removes exposure to wholesale gas prices, but leaves the RO subsidy in place. A more ambitious approach colour deliver greater bill reductions: UKERC analysis from 2025 pointed to potential savings from Pot Zero in the range of £2 to £8 billion per year, which could increase in times of global volatility around gas prices, such as the recent war in Iran. Alternative proposals for reducing consumer prices include shifting more policy costs to general taxation, which would reduce electricity bills by a further 10%. 

Substantial bill reductions will require multiple reforms. The paper highlights several other areas of focus, including further reforms to constraint and curtailment and relatively quick reforms to make tariffs and billing more progressive (e.g. changes to standing charges and Debt-Related Costs allowance). Growing consumer-led flexibility could also deliver savings for households and whole-system costs for all bill-payers, while accelerating electrification (e.g. via electric vehicles and heat pumps) would dilute fixed costs across greater demand. The report stresses that any package of reforms will involve managing trade-offs, requiring social and political choices and clear communication to the public.  

Rob Gross, Director of the UK Energy Research Centre and Professor of Energy Policy and Technology, said: “There is a clear opportunity to reduce electricity bills more quickly. As our electricity system becomes increasingly powered by renewables, the influence of gas on prices is already beginning to decline, but policy can speed up that process. Renegotiating remaining legacy policy costs is a more ambitious reform to decouple electricity prices from gas and would lower costs for consumers while supporting investment in clean energy. These are practical reforms that can improve affordability without slowing progress towards a secure, low carbon electricity system.” 

The report forms part of UKERC’s Mission on Bills research programme, which is examining how wholesale markets, electricity networks and retail energy markets can be reformed to deliver a more affordable, secure and sustainable energy system. 

For further information, please contact: 

Jordan Willis
Communications Manager
UKERC
Jordan.willis@ukerc.ac.uk 
+447806843707
https://ukerc.ac.uk/  

Notes to editors 

Founded in 2004, the UK Energy Research Centre (UKERC) is a world-class interdisciplinary consortium of leading universities, bringing together expertise in social science, engineering, environmental science and economics. Funded by UK Research and Innovation (UKRI), UKERC’s mission is to conduct independent, interdisciplinary analysis, informing government, industry and civil society, and maximising impact through local, national, and international engagement. For more information, visit ukerc.ac.uk.