Electricity bills targeted in planned shakeup to energy pricing

Energy Secretary Ed Miliband argued that “you can’t solve a fossil fuels crisis by doubling down on fossil fuels”, adding that the shift to clean energy was the solution to the threat of climate change and high energy bills.

Even though renewable energy is generating more electricity than ever before, the relatively cheap running costs of wind and solar are not fully reflected in people’s bills.

That is partly because the price of electricity on the wholesale market is set, under the current system, by the last unit of electricity needed to meet demand at any given time.

In Britain, that last unit is often gas-generated electricity — which means that when gas prices spike, so do electricity bills.

Many European countries — such as Spain and France — are not as vulnerable to gas price spikes because they are not as reliant on it for electricity.

The government has decided – for now – against revamping the entire system, with gas still playing an important role when the Sun isn’t shining and the wind isn’t blowing.

But the government wants to shift older, clean energy projects – which account for about one-third of Britain’s electricity generation — on to fixed-price contracts.

They would be paid their own renewable energy price — rather than the market electricity price, which is often set by gas — plus any previously agreed subsidy.