The chief executive of British Gas’s parent company has challenged the notion that moving to renewable energy will reduce electricity costs for UK households.
Chris O’Shea of Centrica said the transition to a net zero power grid is more likely to provide price stability than actual price cuts. His comments conflict with government and Labour Party promises that green energy will make bills more affordable.
This debate is crucial as the UK strives to meet its net zero carbon targets by 2050. With household energy costs remaining a sensitive political issue, understanding the financial impact of renewable energy policies is essential for consumers, policymakers, and industry stakeholders.
Renewable Energy Delivers Price Stability, Not Lower Bills, Says Centrica CEO
Chris O’Shea argued that renewable power sources such as wind and solar will not materially reduce UK electricity prices from current levels. Writing on LinkedIn, he emphasised that the primary benefit of renewables is to protect consumers from price spikes linked to volatile international gas markets rather than to lower bills outright.
According to O’Shea, “They may give price stability and avoid future price spikes based on the international gas market, but they will definitely not reduce the price.”
This position contrasts with the views of other energy leaders, including Greg Jackson of Octopus Energy and Dale Vince of Ecotricity, as well as the UK’s Energy Secretary Ed Miliband.
Miliband has repeatedly asserted that the transition to clean energy will cut household bills by around £300 a year by 2030. However, O’Shea’s analysis highlights the complexities of the current energy pricing system that limit such savings.
Contracts for Difference Scheme Keeps Consumer Prices Fixed Despite Wholesale Fluctuations
A central element in O’Shea’s argument is the Government’s Contracts for Difference (CfD) scheme. Under this arrangement, renewable energy developers receive a fixed, inflation-linked strike price for each megawatt hour generated, typically locked in for 15 years.
If wholesale market prices fall below this strike price, the difference is added to household energy bills. O’Shea pointed out that while wholesale electricity prices may be influenced by international gas prices, the CfD strike price often determines what most consumers actually pay.
For example, last year’s average wholesale electricity price was £82.11 per megawatt hour, with new offshore wind projects securing strike prices up to £82.16 and solar and onshore wind around £70. More experimental renewables such as floating wind and tidal power are considerably more expensive, with strike prices of £195 and £240 respectively.
This structure limits the potential for renewable energy to reduce consumer bills, especially as many contracts are fixed for long periods. Despite British Gas offering incentives like free electricity on days with an oversupply of renewables, O’Shea’s message remains that price stability should not be confused with price reduction.
The Department for Energy Security and Net Zero defended the CfD system, describing it as a means to create a more secure and homegrown energy supply, which could ultimately lead to lower bills.
However, figures from the International Energy Agency show UK electricity prices are already among the highest in the developed world, posing a continuing challenge for affordability.
