This is how to curb inflation and bring down energy bills at the same time

Britain’s energy bills and inflation can fall if we fix the system behind them

Millions of households continue to feel the impact of high energy costs, and the UK remains exposed to global gas market shocks that have repeatedly driven up bills and continue to fuel inflation.

Britain now produces more renewable electricity than ever before, yet households still pay substantial energy prices heavily influenced by international gas markets. As a result, families remain exposed to events thousands of miles away, even when much of their electricity is generated by cheaper homegrown renewable power.

This is not simply an energy policy issue. It is an economic issue. When gas prices rise, household energy bills increase. Businesses face higher operating costs. Inflationary pressures spread across the wider economy. We have seen this repeatedly over recent years, with international events driving sharp increases in UK energy costs and forcing governments to intervene with costly support measures.

The frustrating reality is that this exposure is increasingly unnecessary. Despite the growth of lower-cost renewable generation, gas still sets electricity prices most of the time. This means households regularly pay gas-linked prices for electricity that often costs significantly less to generate. Britain has effectively become a price taker, leaving consumers vulnerable to volatility they can't control.

Our latest report sets out how to change this. In the immediate term, Government moving the remaining policy costs off electricity bills and into general taxation could save around £75 per household annually, ensuring these costs are paid more progressively, according to ability to pay rather than energy use. The report also calls for Britain to break the link between gas and electricity prices by moving gas-fired power stations into a strategic reserve model, allowing cheaper renewable energy to play a greater role in setting power prices. This could save households around £60 a year by reducing exposure to volatile international gas markets. Finally, the report supports measures to lower the cost of financing renewable energy projects and home retrofit programmes through low-cost, long-term lending, which could deliver a further £25 of annual bill savings by reducing the cost of building and operating clean energy infrastructure. Together with measures taken by the Government already this year, these measures could cut bills by around £320 per household annually.

The benefits would go far beyond household budgets. Our analysis suggests these additional reforms could reduce CPI inflation by up to 0.65 percentage points and RPI inflation by around 0.76 percentage points. At a time when the Government, businesses and consumers are all grappling with the challenge of bringing down costs, they represent a way to address the main cause of higher inflation.

For too long, debate around energy policy has focused on how to respond when bills rise. The conversation should instead focus on preventing those price shocks from happening in the first place. The UK's continued dependence on gas pricing means every period of international instability risks feeding directly into household finances and the wider economy.

As long as gas continues to set electricity prices, consumers will remain exposed to volatility regardless of where that gas is produced. This is particularly important because public support for the clean energy transition depends on people seeing tangible benefits. When households hear about record levels of renewable generation but still face rising energy bills, it is easy to see why some begin to question whether the transition is delivering for them.

The reality is that renewable energy is already helping to lower the cost of generating power. The challenge is that our energy market has not kept pace with that reality.

Today's inflation figures should therefore serve as a stark reminder that energy market reform is central to improving living standards, strengthening economic resilience and reducing the UK's vulnerability to external shocks.

Britain has already made substantial progress in building a cleaner energy system. The next step is making sure consumers receive the full economic benefit. At a time when Britain is producing more lower-cost renewable power than ever before, we should be using these advantages to help tackle inflation and reduce household bills, rather than continuing to allow global energy shocks to dictate the cost of living.

We believe that the practical solutions exist to bring down bills by a meaningful amount this winter, not in ten years, and keep them down. The question now is whether we are prepared to ensure that progress translates into lower costs for consumers.

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Kit Dixon is Head of Policy & Regulation at Good Energy.

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