Energy bills could be cut by at least £2billion a year through reforms to stop expensive gas-fired power plants setting the wholesale electricity price, according to a former senior government official.
Gas plants should be removed from the wholesale electricity market and instead given regulated returns to fire up when needed to keep the lights on, argued Adam Bell, who was head of energy strategy at the business department in 2020-21.
Britain’s wholesale market operates on a system of “marginal pricing” whereby the most expensive plant needed to keep the lights on determines the price all generators are paid.
Gas plants generate only about 30% of Britain’s electricity, yet set the wholesale price 98% of the time, according to a new report by Stonehaven, the consultancy where Bell is now director of policy.
Bell argues that severing the gas-electricity price link by removing gas plants from the wholesale power market would be “the single biggest move the government could make to cut bills in the short run”.
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