Energy prices have risen massively over the past few years, and are expected to stay high until the late 2030s.

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.

Ofgem has once again raised the energy price cap in January 2026, by 0.2% – but that’s only half the story. The electricity unit rate has gone up by more than 5%, even as the cost of gas falls.

In this guide, we’ll explain why the cost of electricity has gone up, and why the end of the energy crisis probably won’t mean an end to rising prices.

If you’re wondering how much you could save with a solar & battery system, enter a few details below and we’ll provide an estimate.

What’s happening to UK energy prices?

UK energy bills rose at the start of January 2026.

As of 1st January 2026, the average household on a standard variable tariff is paying £1,758 per year for energy. This is a 0.2% rise on the October 2025 price cap, and a 1.2% increase on the January 2025 cap.

This latest price hike is completely down to the rising cost of electricity, with the electricity unit rate jumping up by 5.1%. In contrast, the gas unit rate is actually falling – by 5.7%.

The energy 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.

Ofgem uses the cap to set a maximum amount that homes can pay for each unit of gas and electricity – so there’s no limit on your total bill. If you use more energy, you pay more.

It’s like if you set a 50p cap on the price of each apple: you couldn’t be charged more than 50p per apple, but if you bought 100 apples, you’d still pay up to £50.

Ofgem has only set a January price cap for the past three years, but prices have risen every single time. 

The energy crisis of 2022/23 saw costs reach unprecedented heights, and its after-effects are still visible. Households are now paying 69% more than they were for energy at the same time in 2021.

That's £716 more per year for the average household, for the same service, and energy costs seem unlikely to return to their pre-2022 level soon – if ever. Unfortunately, this is partly to do with the necessary shift to renewable energy.

Craig Lowrey of energy consultancy Cornwall Insight said: “The real pressure is coming from rising non-energy costs, with levies and policy decisions associated with that investment in renewables driving up bills.”

Octopus Energy’s Rachel Fletcher told MPs in October 2025 that as a result, household energy bills would likely rise by 20% over the next four years – even if wholesale prices fall.

Energy price cap changes, Jan 2024-Jan 2026

Energy price cap predictions

Industry experts, including Cornwall Insight and EDF, expect the price cap to drop in spring, but stay far above pre-energy crisis levels for the rest of 2026.

In the chart above, we’ve used Cornwall Insight’s prediction for April 2026, and EDF’s forecasts for July and October 2026.

The government’s 2025 Budget is behind the predicted fall in energy prices in April 2026, as it revealed major changes to the Energy Company Obligation (ECO) scheme and Renewables Obligation (RO).

These government initiatives were previously funded through everyone’s energy bills, but ECO will end in March 2026, while 75% of RO will be funded through general taxation, rather than energy bills.

Many of the costs included in the price cap are established, such as the cost of the Feed-in Tariff, and some price drops and rises are more or less scheduled, like the Sizewell C nuclear power station.

However, even if you’re pretty certain the price cap will end up somewhere in a small range – for example, between £1,600 and £1,800 per year – it’s still hard to pick the exact right point where it’ll land.

And the further away the time period, the more pinches of salt you should take with any of these estimations.

Companies that predict more than a few months in advance tend to be transparent about their figures' unreliability, since changes in wholesale prices (or geopolitics) are impossible to foresee with total accuracy.

Price cap predictions for nine or 12 months’ time are therefore best taken as rough guides, rather than concrete realities.

New electricity and gas unit rates

Electricity unit rate on the price cap, Jan 2024-Jan 2026

1. The Nuclear Regulated Asset Base (RAB)

This is the main example given by Ofgem to explain the price cap rise, and involves securing fixed returns for developers and investors in nuclear plants.

They receive these returns during the construction and operation of a power station, which theoretically attracts more private funding from businesses who enjoy certainty.

Receiving returns in advance of the site’s completion also reduces the cost of investing, which also makes the prospect more appealing – and every pound from private firms is one less pound the government has to pay.

To fund this programme, Ofgem has added £1 to everyone’s energy bill – and will do so for the next decade – which the government has said will save the public “more than £30 billion” compared to other funding models.

2. The Warm Home Discount

This government scheme, which started in 2011, provides an energy bill discount of £150 per year to households that get certain benefits, including Housing Benefit, Income Support, and Universal Credit.

The previous version of the Warm Home Discount required some recipients to live in homes that are expensive to heat. The 2025/26 edition has removed this condition, which has in effect expanded the scheme.

The government expects the number of households receiving the discount to rise to six million in 2025/2026, nearly double the 3.22 million that benefited in 2024/25.

This has led to an increase in costs, which Ofgem is funding with a 57p per month rise in household energy bills – and that isn’t likely to end any time soon, with the government looking to extend the scheme into the 2030s.

3. The Debt Relief Scheme

Ofgem plans to launch the Debt Relief Scheme in early 2026.

This initiative has two aims: recoup or write-off the hundreds of millions of pounds in debt built up by households during the energy crisis, and create safeguards to ensure this situation doesn’t happen again.

The scheme’s first phase will target benefit recipients who got into at least £100 of debt between April 2022 and March 2024.

The goal is to recover as much money as possible, but Ofgem expects to also “help around 195,000 customers by writing off up to £500 million”.

This scheme will add around £6 to your annual energy bill. “Ofgem: Debt relief scheme would add £6 to energy bills”, Ofgem, 2025

Why might energy bills increase in the long term?

Cornwall Insight has forecasted that energy prices will remain high until the late 2030s, with a relatively small decline in costs in the late 2020s, followed by a significant price rise in the next decade. "New forecast warns power prices to remain elevated until late 2030s", Cornwall Insight, 2023

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

1. Increased demand for electricity
2. More electricity exports
3. LNG imports
4. Grid upgrades
5. Rising costs of grid balancing
6. Ageing gas and nuclear facilities
7. Delays to nuclear plants
8. Inflation

Here’s some more detail on each of these factors.

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, our electricity consumption in 2050 could rise to more than double its 2023 level, according to the Climate Change Committee.

And that’s without taking into account the massively increased demand for electricity from data centres.

Power networks are currently dealing with as much as 100 gigawatts’ (GW) worth of requests from data centres eager to connect to the grid , out of a total of 125GW.

Ofgem has accepted that “data centres account for a significant share of growth in the demand queue” and said the amount of requests “exceeds even the most ambitious forecasts for future demand.”

We’ll also have to increasingly get 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.

One of the best ways of avoiding these higher energy costs is to get solar panels. If you’re interested in how much you could save with a solar & battery system, enter a few details below and we’ll generate an 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.

31 of the country’s 56 nuclear power plants have now 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 and exceeded this figure in 2024, the overall 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 imports a significant amount of LNG to power its electricity generation – though this figure is rapidly decreasing.

We imported more than 210,000GWh of LNG in 2023, which was 42% of our total gas imports. But our LNG imports fell by 53.2% from January to November of 2024, compared to the same period in 2023.

If this trend continued during December 2024 (data not yet available), the UK will have imported around 97,825GWh of LNG across the year, which is still a substantial amount, despite the huge reduction.

Considering gas generated 26% of the electricity used in the UK in 2024, LNG fulfils a large portion of our needs – and this leaves us vulnerable.

81% of our LNG imports from January to November 2024 came 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. Grid upgrades

In July 2025, Ofgem authorised energy companies to spend £24 billion on improving the country's various power grids by 2031. 

£15 billion will go towards maintaining our gas transmission and distribution networks, while another £8.9 billion will fund the expansion of Britain’s high-voltage electricity network.

This project’s new power lines and substations will be made to handle an increase in electricity capacity of up to 126GW by 2030 – all from renewable sources. In 2024, our capacity was 71.7GW.

There's another £1.3 billion in reserve, if needed, as the country embarks on the biggest expansion of the electricity grid since the 1960s.

And this funding is only the first part of a programme to boost the electricity network's capacity, which will end up costing an estimated £80 billion by 2030.

This investment will be paid for by energy customers, as is usually the way, raising the average home's annual bill by around £104 by 2031.

5. Rising costs of grid balancing

Balancing the electricity grid involves controlling supply so that it stays almost exactly level with demand.

The publicly owned National Energy System Operator (NESO) – which runs Britain’s electricity transmission system – uses this mechanism to prevent blackouts.

But in recent times, the cost of balancing has gone up significantly.

It’s set to peak at around £8 billion in 2030, according to NESO – though the operator has said this figure could be halved if projects to prepare and expand the network are brought forward.

This potential £8 billion price tag is largely due to the rising cost of electricity. 

Wholesale electricity is more expensive than it used to be, and when NESO needs to pay for suppliers to provide energy at short notice, it costs more.

Another factor is the increasingly volatile nature of the electricity mix, with the surge in renewable capacity giving rise to more periods when supply falls dramatically – for example, when the wind drops unexpectedly.

Every time this happens, NESO must pay suppliers costly amounts to provide extra electricity.

And sometimes when supply levels surge, for instance during a gale, NESO is forced to pay companies to limit or turn off their power plants entirely, again to avoid blackouts.

With a sufficient number of high-voltage connections and a large amount of storage capacity near the plant, this electricity could be used and stored – but this isn’t always the case.

6. 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.

7. 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 energy companies who guarantee to fill in any gaps (or reduce any dangerous peaks) in the supply, as part of the Capacity Market, a NESO mechanism that pays providers to jump in at a moment’s notice.

To take part, potential providers must bid for government contracts in twice-annual auctions that apply to periods around four years in the future – and the rate has jumped significantly.

It was priced at £15.97 per kilowatt (kW) for 2023/24 , which nearly doubled to £30.59 per kW for 2025/26 – before more than doubling for 2026/27 , to £63 per kW.

This will again have an unwanted impact on energy bills.

8. 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.

How 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.

1. Switch to solar
2. Insulate your property
3. Fix your energy bills
4. Use smart energy apps

1. Switch to solar

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

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

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.

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 high upfront cost is a barrier to many households – 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 system will be insured by Aviva against damage, fire, and theft, and you’ll receive 24/7 monitoring, as well as maintenance support.

You’ll also be reimbursed for extended downtime periods, and you’ll get a free battery upgrade, and a replacement inverter (if required).

That means your installation will work seamlessly, look excellent, and help you save on your energy bills from day one.

2. 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.

3. 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 – but Sunsave Plus offers a more long-term solution.

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.

4. Use smart energy apps

These are apps designed to help you understand, manage, and reduce your energy usage, such as Loop.

You can integrate them with your smart meter to give you a detailed view of your consumption, empowering you to make important changes at home.

They can’t cut your usage or energy bills by themselves, but if you absorb the information they provide, you can save a significant amount of money.

If you’re on a time of use tariff like Agile Octopus, you may not even have to reduce your consumption – just shift it.

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 an estimate.

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.

Why is electricity so expensive in the UK?

Electricity is so expensive in the UK because of rising policy and network costs.

This includes the construction of the Sizewell C nuclear station, the expansion of grants like the Warm Home Discount, and the new Debt Relief Scheme – all of which are funded by increases in everyone’s energy bills.

Historically, electricity has been expensive because of the marginal cost pricing mechanism, which used to ensure that gas had an outsized impact on the cost of electricity.

The two are so closely linked because the wholesale price of electricity is set by the cost of producing the last unit of electricity needed to meet demand – and this last unit is almost always generated by a gas power plant.

And gas is made more expensive by the Carbon Price Support and Emissions Trading Scheme, which are government policies that charge suppliers for using fossil fuels to produce electricity.

However, wholesale gas prices have fallen since February 2025, meaning that recent price rises have been due to other factors.

Should I fix my energy bill now or wait?

If you can wait to fix your energy bill until April 2026, you could save a lot of money.

Energy costs are expected to fall significantly in April, then stay relatively stable for the rest of 2026.

So if you’re not interested in time-of-use import tariffs like Agile Octopus, you should consider fixing your rates after the clocks go back.

As always though, watch out for any exit fees.