A rise in electricity prices could hit consumers

Article posted

24th Aug 2023

Read time

4-7 min read


Mollie Pinnington

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If the proposed overhaul of the market by the government and Ofgem proceeds, it's expected that electricity costs for consumers could escalate significantly. This would result in increased financial pressure on consumers who are already grappling with tight budgets. The proposed changes signify a major shift in the energy sector, with potential repercussions for consumers' utility bills.

Under the new scheme considered by the government and Ofgem, wholesale prices of electricity are likely to fluctuate across the UK. This means that the costs will no longer be uniform nationwide; instead, they will be dependent on the region's supply and demand dynamics. Regions with high demand and low supply might see higher prices, while those with surplus energy could experience lower prices. This geographical pricing variation could further exacerbate the cost disparities among consumers across different parts of the UK.


This plan would essentially carve up the country into different pricing zones, meaning the cost of electricity would be determined by location. Under such a system, the price you pay for your electricity could vary significantly based on whether you live in an area with a surplus of power or an area with high demand. In essence, your postcode could determine your utility bill. This uneven pricing structure could, in turn, lead to a postcode lottery, where the affordability of electricity is dictated by geographical location rather than usage. This marks a departure from the current model, where prices are generally consistent nationwide, and might pose a new set of challenges for consumers already feeling the pinch of rising living costs.


However, experts in the renewable energy industry have suggested potential solutions that could allow Ofgem to implement necessary market changes without posing a financial risk to consumers. They propose an increased investment in renewable energy sources, like solar and wind power. This would not only reduce dependence on traditional, cost-heavy energy sources but also ensure a more consistent and equitable supply of electricity across different regions. As renewable energy technology continues to advance, harnessing these resources could become an increasingly cost-effective solution, potentially curbing the anticipated rise in electricity prices. Moreover, such a transition would be in line with global sustainability efforts, contributing to the fight against climate change while also addressing the pressing issue of energy affordability.


The renewables industry is keen on reforming contracts to bolster clean power deliverability. This entails revising the terms of Power Purchase Agreements (PPAs) to encourage more generation of renewable energy. By ensuring favourable contract terms for producers of green power, the industry could stimulate the development of more renewable energy projects. This would lead to greater energy capacity from cleaner sources, thereby reducing the pressure on traditional power sources and their associated costs. Additionally, contracts could be structured in a way that incentivizes continual innovation in sustainable energy tech, leading to advancements that could make renewable energy more dependable, affordable, and widespread. In effect, the reshaping of contracts could serve as a strategic tool for driving the transition towards sustainable energy, mitigating the effects of price fluctuations, and ensuring a more equitable energy landscape across different regions.


Indeed, amending current energy policies could potentially lower prices and increase investor confidence in the renewable energy sector. Constructive policy interventions, such as tax incentives for renewable energy projects or subsidies for clean energy research, could encourage increased private sector investment in renewables. This could lead to economies of scale, reducing the cost per unit of energy and consequently lowering prices for consumers. Furthermore, clear and stable policy frameworks could give investors the confidence they need to invest more heavily and for longer terms in renewable energy projects. This could accelerate the development of renewable technologies and infrastructure, further driving down costs over time. Ultimately, proactive policy amendments could create a virtuous cycle of investment, innovation, and cost reduction, while simultaneously fostering a more sustainable and equitable energy landscape.

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