New analysis by energy think tank Ember reveals that the skyrocketing price of fossil gas was responsible for 85% of the increase in UK wholesale electricity prices in 2021. In just one year, wholesale electricity prices quadrupled and it became almost five times more expensive to generate electricity from gas plants.
“Gas is the villain. Not the green investments that can end the UK’s dependence on this costly and polluting fossil fuel,” said Ember COO Phil MacDonald.
Monthly average UK wholesale electricity prices jumped by almost £190/MWh in 2021 – from £55/MWh (December 2020) to £245/MWh (December 2021). The cost of fossil gas was responsible for £162/MWh (85%) of this spike.
The UK remains heavily reliant on fossil gas for its electricity. In 2021, the UK generated 40% of its electricity from fossil gas plants. From December 2020 to December 2021, the cost of generating electricity from a combined cycle gas power plant (CCGT) surged from £48/MWh to £227/MWh (+£179/MWh). The carbon price only accounted for £17/MWh (10%) of the increased cost of generating electricity from CCGTs.
Skyrocketing wholesale electricity prices will soon hit consumers directly. The cap on UK energy bills is set for an unprecedented increase in April 2022, likely pushing millions more into energy poverty. Despite claims by a small group of Conservative MPs in the ‘Net Zero Scrutiny Group’, the energy crisis has almost nothing to do with green subsidies. The principal reason is the skyrocketing price of fossil gas. Previously Ember forecasted that the gas price spike will add £29 billion to UK electricity bills in 2022.
“The UK energy crisis is a fossil fuel crisis. The more wind turbines and solar panels the UK can build, the less the country will be hostage to the volatile global gas price,” said MacDonald.
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