The way the cost of renewable electricity is determined in the UK’s energy market is “bonkers”, Octopus Group Founder and Chief Executive Officer has suggested.

Greg Jackson said: “The UK has an outdated way of running its electricity market, which is why renewable electricity is costing more during a gas crisis.

“The way it works is that every half hour there’s a single price for electricity in the UK, and it’s set by a process in which National Grid procure the generation to meet our needs from generators every half hour. And they pay a single national price to all those generators.

“So, companies like Octopus face a single price regardless of whether we are buying renewable or non-renewable electricity. In fact, to make it worse, renewable typically costs more because we either have to pay for certification or to pay for what’s called balancing costs.”

Business Secretary had previously stressed that the link between gas and electricity prices cannot stay forever.

Mr Jackson explained that companies are not paying only the national price of electricity, which is set by gas, but they pay extra costs on top for it to be renewable.

Octopus boss added: “This is bonkers. Fundamentally, we need a market reform that enables all to see the benefit of cheaper, renewable electricity. What we really need is market reform and dramatically more renewable generation to bring the cost down.”

Last week, energy suppliers, including ScottishPower and E.ON called on the government to create a ‘special fund’ that would enable the industry to ‘freeze’ customers’ bills for two years.