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 raised the energy price cap by 13% for the three-month period starting in July 2026, which is largely down to issues caused by the Iran conflict.

This may not even be the highest it goes this year, with a further increase expected when the October price cap is announced in August.

In this guide, we’ll explain why the cost of electricity is going up, and why prices are set to continue rising in the long term.

And if you’re wondering how much you could save on your energy bills 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 are set to rise in July 2026.

As of 1st July 2026, the average household on a standard variable tariff will pay £1,862 per year for energy, which is a £221 increase compared to the April 2026 cap (or 13.47%).

Industry experts expect energy bills to increase further in October 2026, and in the long term (more on this below).

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.

The £1,862 figure comes from Ofgem's assessment that over a year, the "medium" home uses 2,700kWh of electricity and 11,500kWh of gas. These are known as the Typical Domestic Consumption Values (TDCVs).

For the October 2026 price cap, Ofgem will change these numbers to 2,500kWh and 9,500kWh.

The energy crisis of 2022/23 saw costs reach unprecedented heights, and its after-effects are still visible. Households are paying 64% more than they were for energy at the same time in 2021.

That's £724 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.

Energy price cap changes, Jan 2024-Jul 2026

New electricity and gas unit rates

The July 2026 price cap has energy prices rebounding upwards, after a temporary drop in April.

This fall was caused by the government closing the ECO scheme at the end of 2026, and shifting 75% of Renewables Obligation scheme funding to general taxation – but the Iran conflict has wiped out that drop.

The main change is the unit rate of gas, which has rocketed up by 27.7%, to its highest point since March 2024.

Ofgem has also raised electricity's unit rate by 5.8%, to a level not seen in the July price cap since 2023, when the previous energy crisis was in full swing.

The standing charges have barely changed, which means the maximum daily fee to use electricity is still more than double what it was in early 2022.

The electricity unit rate has been high for years, as you can see in the following chart.

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

Wholesale costs

Wholesale energy rates have gone up by 28% over the past three months, mainly due to the Iran conflict.

With the Strait of Hormuz effectively closed to almost all liquefied natural gas (LNG) suppliers, the wholesale price of gas has skyrocketed.

As a result, Ofgem has raised its maximum unit rate for gas by 27.7% – and because gas continues to have a large impact on the price of electricity in the UK, costs have increased across the board.

We've gone into more detail about the Iran conflict's effect on energy prices below.

Operating and other costs

With Ofgem lowering its TDCVs to reflect falling domestic energy usage, it's effectively acknowledging that suppliers will make less money from the average household.

To help soften this blow, Ofgem has raised its core operating costs allowance by 5%, which means companies won't lose out to the same extent.

And every time the price cap increases, some other costs go up by the same percentage.

This includes headroom, which gives energy suppliers a buffer for unpredictable costs, and Earnings Before Interest and Tax (EBIT), which allows these firms to make a reasonable profit.

The amount you'll pay in VAT will also rise with the price cap, as 5% of a larger amount is always higher.

How has the Iran conflict affected the price cap?

The US and Israel’s conflict with Iran, which started all the way back in February 2026, has triggered large increases in the cost of gas and oil.

The price of oil hit a four-year high on 30 April 2026, reaching $126 (£94) per barrel before falling the next day. And within three weeks of the start of the war, the cost of European natural gas had nearly doubled.

This is largely because about 20% of the world’s gas and oil trade passes through a waterway between Oman and Iran called the Strait of Hormuz – which Iran has kept almost completely closed since early March.

In 2025, 20 million barrels passed through the strait – per day.

There are conflicting reports about whether this crucial artery will reopen soon, but Rabobank analysts have said they expect the closure to last until September.

The world’s supply of gas and oil has rapidly shrunk since the war began, which has naturally increased prices.

The cost of electricity has risen too, because gas power plants are one of most popular ways to produce electricity globally. Gas also sets the price of electricity about 60% of the time in the UK.

International markets always affect the price of fossil fuels like oil and gas, regardless of whether it's produced in the UK or imported from abroad.

As the UK government said on 6 March 2026: "We are price-takers, not price-makers."

UK households are having to deal with energy price spikes as a result, but costs could yet spiral even higher.

In May, senior executives at Norwegian energy behemoth Equinor ASA said Europe may see a critical shortfall in natural gas reserves if the strait stays closed for another one to three months.

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.

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.

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.

The country’s nuclear power plants now have an average age of 40.5 years, having been initially designed to run for 30.

France’s national safety authority has permitted its older reactors to run for at least 50 years, they’re already showing their age.

Its 57 nuclear reactors produced 373TWh in 2025, which represented a third consecutive year of growth – but this was less than the plants produced in any year from 2000 to 2019.

EDF’s production levels are declining, and this reduction in the amount of available electricity 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 a combined 248,000GWh of LNG across 2024 and 2025, which was 49% less than we did across 2022 and 2023.

Between 2024 and 2025, LNG made up 27% of our total gas imports, down from 44% across 2022 and 2023.

And yet, considering gas generated 26.8% of the electricity used in the UK in 2025, LNG still fulfils a large portion of our needs – which leaves us vulnerable.

88% of our LNG imports in 2025 came from the US, Algeria, and Qatar. 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 international relations break down, this could leave little time to find new sources, resulting in higher price increases for customers.

For more information on our current energy sources, read our guide to where the UK gets its gas from.

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 nearby storage capacity, this electricity could be used and stored – but this isn’t always the case.

The emergence of virtual power plants will help make grid balancing processes cheaper and more effective, but mass adoption is necessary before they have a major impact.

6. Ageing gas and nuclear facilities

The UK will need to rely on gas and nuclear energy for a while, to fill the gaps in our supply as 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, by which point all the country's nuclear reactors will be at least 40 years old.

Hinkley Point C has the only two reactors set to start operating by 2035, and though its 3.26-gigawatt capacity is large, it won't make up for all the nuclear reactors set to be decommissioned by that point.

The UK could then end up building new gas plants, which will leave customers paying more, as the process would likely cost billions of pounds.

On the other hand, if the government decides not to build new gas plants, the UK’s supply of electricity may not be able to keep up with its growing demand. This would also raise prices.

7. Delays to nuclear plants

Sizewell C, a nuclear plant first proposed in 2012, is now set to open in 2039, while Hinkley Point C's commission date has been pushed back to 2030.

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.

When the Iran conflict ends, we’ll likely return to seeing around 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 94% on your electricity bills with a solar & battery system.

This is based on projected first-year savings from a sample of over 600 systems installed by Sunsave across the UK in 2025.

The average system is 5kWp, with 44% of solar electricity used at home and 56% exported to the grid. Actual savings with solar will vary depending on several factors, including your property and system.

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 will go up in July 2026, and are poised to continue rising in the medium and long term.

The Iran conflict has caused energy prices to surge across the world, and even if the war ends soon, its aftereffects will probably be felt for a while. That's why energy prices are set to stay high in 2027.

Thankfully, there’s a solution. Solar panels can cut the amount 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 provide an estimate.

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