A new report from the UK Energy Research Centre (UKERC) has identified a series of reforms that could reduce UK electricity bills, including changes to renewable energy subsidies and shifting remaining policy costs into general taxation.
The report, The Cost of Electricity in the UK: Drivers, Challenges and Opportunities for Reform, examines how electricity bills have changed between 2015 and 2025 and outlines measures that could improve affordability while supporting the transition to a low carbon electricity system.
According to the research, average annual domestic electricity bills increased by around £325 in real terms over the decade.
Rising wholesale gas prices and legacy renewable energy subsidies accounted for 51% of the increase, with policy costs contributing 26% (£85) and wholesale fuel costs 25% (£81).
Since 2021, wholesale fuel costs have represented 66% of bill increases following the energy crisis triggered by the war in Ukraine. Government action introduced in April 2026 reduced average household bills by £88 by addressing a large proportion of policy costs.
The report highlights UKERC’s proposed “Pot Zero” mechanism, which would allow older renewable projects supported by the Renewables Obligation to move onto Contracts for Difference.
Rob Gross, Director of the UK Energy Research Centre and Professor of Energy Policy and Technology, said: “There is a clear opportunity to reduce electricity bills more quickly. As our electricity system becomes increasingly powered by renewables, the influence of gas on prices is already beginning to decline, but policy can speed up that process.”
The organisation argues a more ambitious approach than the Government’s recently announced wholesale price Contracts for Difference could deliver annual savings of between £2 billion and £8 billion, with greater savings possible during periods of volatile gas prices.
Alternative proposals include moving more policy costs into general taxation, which UKERC estimates could reduce electricity bills by a further 10%.
The report also recommends reforming constraint and curtailment costs, making tariffs and billing more progressive, encouraging greater consumer flexibility and accelerating electrification through technologies such as electric vehicles and heat pumps.
