Will energy prices go down?

Energy prices have risen massively over the past couple of years, and are expected to stay high for the rest of the 2020s.

The energy crisis has caused distress and hardship all over the country, with millions thrust into fuel poverty and countless households having to make painful cuts to get by.

In this guide, we’ll explain why the end of the energy crisis probably won’t mean an end to rising prices, the factors behind this trend, and what you can do to lessen its impact.

If you would like to see the savings you could get from a solar & battery system, click the button below. Just answer a few quick questions, and we’ll provide an estimate.

Are UK energy bills going up or down?

UK energy bills have fallen since the peak of the energy price crisis, but are likely to rise again before the end of the year.

From October 2022 to October 2023, the average household paid £2,197 for energy – more than twice the £1,090 it paid during the same period two years earlier.

Ofgem lowered the price cap to £1,568 per year in July 2024, before increasing it by 10% for the October to December 2024 period, with the average home paying £1,717 per year just as the days get shorter, the temperature drops, and energy usage rises.

Energy costs are still well above their pre-2022 level. They seem unlikely to drop back down to the pre-2022 level for the foreseeable future, if ever – including in January, when the first price cap of 2025 comes into effect.

Annual electricity bill on the price cap, Jan 2024-Jan 2025

Cornwall Insight’s long-term predictions

Cornwall Insight has forecasted that energy prices will remain high until the late 2030s.

The analysts expect wholesale prices to fall in the short term, as renewable energy sources like wind and solar come to the fore.

However, the success of this green revolution will depend on government policy and the economy, both of which will affect the public’s enthusiasm for eco-friendly options.

And though price decreases are always welcome, household bills will still be well above pre-2022 levels, according to the consultancy.

The period of relative calm also won’t last long. The decline in costs is reportedly set to end at the end of the 2020s, as the UK’s expanding renewable capacity allows it to rapidly electrify its transport and heating sectors.

This transition is crucial for reaching net-zero emissions and reducing costs for customers in the very long term, as well as making the UK more self-sufficient when it comes to energy – but we don’t have enough storage to make it work as it should.

So when the sun isn’t shining and the wind isn’t blowing, instead of exclusively using the electricity we gained earlier from solar and wind farms, we’ll have to turn to gas to keep us going.

Some of our energy will also be sent to mainland Europe, as the continent struggles to fill the gaps left by France’s declining nuclear capacity.

If Europe also moved to create renewable energy capacity at a faster level, it would help us – but that doesn’t seem likely at the moment.

Beyond the end of the 2030s, there are too many variables to accurately predict how much electricity and gas will cost.

For instance,  an event on the other side of the world could trigger a global shift in energy prices, which even analysts like Cornwall Insight understandably can't predict.

The impact of inflation

From 2000 to 2020, the price of electricity went up by 5.5% per year, on average, according to the Office for National Statistics (ONS).

Inflation was the main reason for this rise, rather than any variations in wholesale prices. So even if wholesale prices fall, the cost of energy will still probably go up.

Now the worst of the energy crisis is over and prices have stabilised at around £400-£500 more per year than before, we’ll likely return to seeing 5.5% of annual inflation growth, on average.

Why might energy bills increase?

Energy bills are likely to increase for a number of reasons.

The UK and Europe is already seeking to electrify its heating and transport sectors while simultaneously shifting its energy consumption from fossil fuels to renewable sources.

This will lead to teething problems, particularly as the UK will need to export more electricity to the rest of Europe to meet the extra demand created by France's declining nuclear network.

We’ll need gas to see us through this transition, but with our gas facilities increasingly in need of a refresh, there are no good options. Either energy customers will have to fund the creation of new plants and storage centres, or we’ll face a shortage of energy.

In both cases, bills will rise.

The UK also still relies heavily on liquefied natural gas (LNG) imports, which leaves us vulnerable to geopolitical events like Russia’s invasion of Ukraine.

1. Increased demand for electricity

To meet our legally binding target of net-zero emissions by 2050, the UK will have to replace much of its gas, oil, and petrol usage with electricity.

As the popularity of electric vehicles and heat pumps surges, we’ll end up increasing our electricity consumption by 50% between 2020 and 2035, according to consultancy firm McKinsey.

We’ll also have to increasingly derive our electricity from renewable sources like solar, wind, and hydropower.

This shift will lower energy prices eventually, but not for a few decades at least. Much of the cost of building up our renewable capacity – not to mention expanding the electricity grid – will be placed on customers.

Gas will inevitably be required throughout this rapid process of electrification, as we rush to create the storage needed to keep providing us with electricity during periods with low amounts of wind and sun.

So it’s not ideal that gas prices are predicted to stay high until 2050, according to the UK government.

If you’re interested in how much you could save with a solar & battery system, enter a few details below and we’ll generate a quick estimate.

2. More electricity exports

Over the next decade or two, UK companies will export more of their electricity to Europe, particularly as France’s government-owned nuclear capacity continues to decline.

By the end of 2024, 31 of the country’s 56 nuclear power plants will have run for 40 years or more, and though France’s national safety authority has permitted its older reactors to run for at least 50 years, they’re already showing their age. 

The country’s 56 nuclear plants – of which only 46 are currently online – produced 23% less electricity in 2022 than in 2021.

This represented a dramatic fall from 361TWh to 279TWh, and though France’s nuclear output bounced back to 320TWh in 2023, the downward trend is clear.

EDF’s production levels are declining, and the high of 393TWh in 2018 is likely to be a distant dream in the near future.

As France is gradually less able to provide the rest of Europe with electricity, UK suppliers will step in to replace these nuclear plants.

This reduction in the amount of available electricity in the UK – and across Europe – will cause prices to rise.

3. LNG imports

The UK relies heavily on LNG to power its electricity generation.

We imported more than 209,000GWh of LNG in 2023, which was 42% of our total gas imports.

Considering gas generated 32% of the electricity used in the UK in 2023, LNG fulfils a large portion of our needs – and this leaves us vulnerable.

85% of our LNG imports come from the US, Qatar, and Peru. Geopolitical turbulence in any of these countries could significantly reduce our supply of electricity, with little to no warning.

Any fall in our supply levels will lead to a rise in household energy bills. If the drop is sudden, as it often is when geopolitical relations break down, this will leave little time to find new sources of energy, resulting in a higher price increase for customers.

4. Ageing gas and nuclear facilities

The UK will need to generate electricity with gas and nuclear energy for the next couple of decades at least, to fill the gaps in our supply while we build up our renewable and storage capacity.

However, many of the country’s gas and nuclear power plants are deteriorating and will see their productive capacity decline before being shut down in the near future.

Half of the UK's 32 gas plants will reach the end of their typical 30-year lifespan by 2030, as well as four of the country's five nuclear power stations.

Sizewell C is the only nuclear plant likely to open by 2035, and though its 3.2-gigawatt capacity is large, it won't even make up for all the nuclear capacity lost by that point.

The UK may then end up building new gas plants, which will leave customers paying more, for multiple reasons.

The plants will likely cost billions of pounds, which will directly lead to household energy bills increasing. Our continued reliance on gas will also leave consumers open to global gas price rises, which was the whole reason why the energy crisis hit the UK so hard.

On the other hand, if the government ultimately decides not to build new gas plants – in line with the country's legal obligation to cut its carbon emissions by 78% by 2035 – the UK’s supply of electricity may not be able to keep up with its growing demand.

This would also raise electricity prices.

5. Delays to nuclear plants

Sizewell C, a nuclear plant first proposed in 2012, will not be completed by the mid-2030s at the earliest, and Hinkley Point C's commission date has been delayed until some time between 2029 and 2031.

When combined with all the nuclear and gas plants set to close by 2030, this has created a situation in which grid supply costs will stay high until the end of the decade and probably beyond, according to Cornwall Insight.

This will largely be driven by backup power suppliers who guarantee to fill in any gaps in the electricity supply over a certain period.

They bid for these government contracts in twice-annual auctions that apply to periods around four years in the future – and Cornwall Insight has forecast that the rate will jump from its current £18 per kilowatt (kW) to £51 per kW for 2024-25, then rise again to £65 per kW for 2027-28.

This will again have an unwanted impact on energy bills.

What can you do to protect yourself against energy bill increases?

There are a few ways to protect yourself against energy bill increases.

You should focus on cutting the amount of energy you use, securing low fixed prices if possible, and producing energy with renewable technology like solar panels.

• Switch to solar
• Insulate your property
• Fix your energy bills
• Use smart energy apps

Switch to solar

You can cut the amount of electricity you import from the grid in half by generating your own electricity instead, with solar panels.

You can also sell your excess solar electricity to the grid, for additional savings.

And if you’re planning on getting a heat pump or electric vehicle any time soon, getting solar panels can save you even more money.

The only major disadvantage is the initial price tag – but fortunately, Sunsave Plus allows you to enjoy all the benefits of solar with no upfront cost, and to instead pay a fixed monthly fee.

With Sunsave Plus, you’ll receive best-in-class kit in one easy package that comes with a 20-year Sunsave Guarantee. Your installation will work seamlessly, look excellent, and save you money from day one.

Insulate your property

It’s always a good idea to insulate your home as effectively as possible, to cut the amount of energy required to fulfil your heating needs.

You can insulate your walls, loft, and roof, as well as ensuring every window is fitted with double glazing.

Making all these improvements can potentially save you hundreds of pounds per year – but the rate of return isn’t usually as good as it is with solar panels.

Fix your energy bills

You can fix your energy bills for the next year or two, which protects you against price rises in that period.

This is usually only a short-term solution – unless you choose Sunsave Plus.

With Sunsave Plus, your monthly payments are fixed for 20 years, meaning you’ll be protected against inflation and electricity price rises well into the 2040s.

What’s more, the amount you save every year will also grow over time, as the cost of grid electricity steadily increases over the decades.

Use smart energy apps

There are apps designed to help you understand and manage your energy usage, such as Loop. By integrating with your smart meter and giving you a detailed view of your usage, smart energy apps empower you to make important changes at home.

Summary

Energy bills are poised to continue rising in the medium and long term.

The cost of electricity increased by 5.5% between 2000 and 2020, and this rate may even be surpassed in the coming decades, as the UK attempts to electrify its heating and transport networks while simultaneously fulfilling increasing needs in the rest of Europe.

Our reliance on LNG and gas are also likely to lead to higher energy prices – but thankfully, there’s a solution.

Solar panels can slash the electricity you’ll need to buy from the grid, and allow you to make extra money by selling excess electricity.

If you’re interested in how much you could save with a solar & battery system, enter a few details below and we’ll generate a quick estimate.

Energy bill forecasts: FAQs

Will energy prices ever go down in the UK?

Energy prices will go down periodically, but in the long run, all signs point to them increasing.

Between 2000 and 2020, the cost of electricity increased by 5.5% per year on average, according to the Office for National Statistics (ONS).

There’s every reason to suspect this trend will continue now, or even that the cost of electricity will rise more quickly.

With the UK electrifying its heating and transport systems, demand for electricity is set to rise sharply, and our supply may well struggle to keep up with this level of growth.

Will energy prices go down in 2024?

Energy prices went down in July 2024, by around 8% for the typical three-bedroom household.

But homes are forecast to see their energy bills rise again in October, by 10% on average.

And over the next few years – at least – it seems likely that they’ll continue to increase.