The April 2025 price cap: why is it increasing?

Ofgem has announced the latest energy price cap, which will come into effect on Tuesday 1st April. 

UK homeowners have already had to deal with two successive increases in the energy price cap since October 2024, but unfortunately there is a third one on the way - with energy providers expecting further increases later in the year. 

Here’s what the new price cap will mean for your energy bills, a bit of detail about why it’s risen yet again, and how solar can make the difference.

If you’re already thinking about solar as a solution, enter a few details below and we’ll get back to you with a savings estimate.

What's the new energy price cap?

The new energy price cap is £1,849 per year for the average three-bedroom, dual fuel household that pays with direct debit – the most common situation for UK homes.

This price cap, which will be in effect from 1 April to 30 June 2025, represents a 6.4% increase from the January-April rate of £1,738 per year.

Here’s how the specific unit rates will change:

How is the energy price cap calculated?

Introduced by Ofgem in 2019, the price cap is the maximum amount that can be charged for each unit of gas and electricity used on a standard or default tariff by a dual-fuel household which pays with direct debit. It’s designed to protect households from excessive rates, and is recalculated every three months. 

This means there’s a limit on what you can be charged per unit of electricity or gas, but there’s no limit on how much you pay in total - this figure is entirely determined by how much energy you use. 

The £1,849 figure is based on Ofgem’s view of typical household energy consumption, i.e. 2,700kWh of electricity and 11,500kWh of gas each year. But if your usage exceeds this, naturally you’ll pay more than £1,849.

Ofgem calculates the price cap based on wholesale energy costs, network maintenance and development costs, government policy costs, suppliers’ operating costs, and VAT - although the driving factor is usually wholesale energy costs, which make up 45% of the April 2025 price cap.

However, the influence of wholesale costs is much greater in the case of gas than electricity.

Why is the energy price cap increasing again?

Experts had already been forecasting a jump in the price cap this April, but this increase is larger than predicted.

A particularly cold, still winter in Europe has led to significantly depleted gas storage levels, which has driven up the wholesale cost of energy. 

The unusually low levels of wind across the continent during December and January naturally reduced the output of wind farms, which meant gas had to step in to make up the shortfall. 

As a result, the occupancy rate of the EU’s natural gas reserves has fallen to below 50% as of 10th February. For context, this time last year the reserves were filled to 67%. 

France currently has the lowest gas storage levels in Europe, at just 29.85%, which is below the European Commission’s target of 41%.

Another reason for such depleted natural gas reserves is the suspension of Russian gas flows to Europe via Ukraine on 1st January.

This situation has led to the price of natural gas rising to its highest point in two years, at €58.75 per megawatt-hour (MWh). 

And Great Britain has ended up relying very heavily on gas over this period, with gas ranking as our biggest power source in January 2025, providing 38.3% of our electricity. 

Rising wholesale costs were responsible for 77% of this quarter's price cap increase, with government social and environmental schemes being the second most influential factor at 11%.

The other cause of the price cap rising named by Ofgem is inflation, which is currently at 3.9% - its highest level since January 2024.

Will energy bills rise again later this year?

Accurately predicting how energy bills will change more than a few months in advance is notoriously difficult, as a major, unprecedented geopolitical event could turn everything on its head.

For instance, nobody predicted the energy crisis, and not even the experts know what global events might be on the horizon.

EDF is expecting the price cap to fall slightly in July 2025, before two consecutive increases in October 2025 and January 2026.

And regardless of what happens to the price cap this year, energy prices are expected to stay above pre-2022 levels until the late 2030s, according to energy consultants Cornwall Insight. 

To learn more, check out our detailed summary of what will happen to energy bills in the long term.

What does the new energy price cap mean for solar?

Solar panels are an extremely effective way of reducing electricity bills in the UK, despite the cloudy weather. 

On average, you could save 86% on your electricity bills with a solar & battery system. 

This figure is based on a sample of over 150 systems installed by Sunsave across England and Wales in 2024. The average system is 6.1kWp, with 54% of solar electricity used at home and 46% exported to the grid. 

After 1st April, the average household will spend £1,849 per year on energy - about £926 for electricity and £926 for gas. But with a solar & battery system, it could cut its electricity bill down to £130 per year. 

And if energy bills continue to rise, the savings from solar become even greater. That’s because the amount of money you would need to spend to buy all your electricity from the grid increases, whereas your solar panels are giving you the majority of this electricity for free. 

With modern solar panels lasting around 30-40 years, that’s a very long period of low electricity bills. 

The UK's first solar subscription

If you’re interested in going solar but you’re put off by the high upfront cost, consider Sunsave Plus, the UK’s first solar subscription. This means you can switch to solar with no upfront cost, and instead make fixed monthly payments for 20 years. 

Your system will also be protected by the Sunsave Guarantee for the full subscription term, which includes a free battery and inverter replacement, 24/7 monitoring and maintenance, downtime cover, and insurance. 

In many cases, it’s possible for your energy bill savings to exceed your monthly fee, so you could have more money in your pocket each month. This also means instant savings without having to wait years to break even. 

To find out how much you could save with Sunsave Plus, enter a few details below and we’ll get back to you with an estimate. Or, to learn more about the product, click here.