Public procurement of electricity could save GB households £200 a year, says thinktank

Experts have warned the government’s proposals may only lead to modest savings for consumers and a more radical approach is needed. Photograph: Annegret Hilse/Reuters View image in fullscreen Experts have warned the government’s proposals may only lead to modest savings for consumers and a more radical approach is needed. Photograph: Annegret Hilse/Reuters Public procurement of electricity could save GB households £200 a year, says thinktank Government plan to de-link gas and electricity prices aims to reduce bills for consumers after global surge in prices Households in England, Scotland and Wales could save nearly £200 a year on their energy bills if the government stepped into the market to act as the sole buyer of electricity, according to a thinktank. The research found that public procurement of electricity, meaning the government would become the “single buyer” of power before it is resold to consumers, could shave billions of pounds from electricity prices. Currently, power prices to consumers are set by the cost of gas, which can be highly volatile. Average energy bills are to rise by more than £200 in July because of the impacts of the Iran war, which has driven up gas prices. Although the UK’s increasing use of cheaper renewable energy should bring prices down, the current structure of the market allows gas generators to set the wholesale price for all so consumers do not feel the benefits. In a report for thinktank Common Wealth, Donal Brown, a senior researcher in energy policy and political economy at the University of Oxford, said: “Britain’s electricity market was designed for a fossil fuel age and it’s now a key barrier to a lower cost, low-carbon future.” “Gas still sets the price for 80% to 90% of the time, while generating only a quarter of our power. This funnels billions in windfall profits to private generators, while UK homes and businesses pay some of the highest bills in the world,” Brown said. The government is under growing pressure to tackle the cost of electricity after the war in Iran caused a global surge in oil and gas markets, creating the second energy price shock in four years. But experts have warned that proposals set out earlier this year to de-link gas and electricity prices would lead to only modest savings for consumers , unless a more radical approach is taken to reforming the market. Under the thinktank’s plan to limit the impact of expensive gas generation, the government would effectively buy all the power generated in England, Scotland and Wales through contracts offered by a publicly accountable body to generators. Gas-fired generators would join a “strategic gas reserve”, whereby generators would be paid to step in when renewables were producing less or nuclear reactors were offline, according to the research. Meanwhile, the UK’s legacy nuclear power plants, older windfarms that benefit from generous past subsidies, and existing hydroelectric plants would be paid through “public power purchase agre