Deri Hughes is a private investor and former parliamentary assistant.

How much does electricity cost? “Too much”, is the most likely answer from the nation, its households and its businesses. Ask the Leader of the Opposition, if there is any doubt. But how much is too much?

Quantification of electricity costs must take into account all of the costs borne by consumers. The standard method is to combine the price paid for units of energy with any other supply charges incurred, and to divide that total by the number of units of energy consumed.

The typical result is that smaller consumers pay a higher price per unit than heavier users. That is to be expected; there is a strong tendency towards economy of scale.

The Office of Gas and Electricity Markets (OFGEM) calculates that the typical “medium” British household consumes 2,700 kilowatt-hours (kWh) of electricity per annum. OFGEM’s retail price cap calculations use a slightly higher value of 3,100kWh. Those figures are valid for households that use mains gas or some other fuel for space and water heating; households that use electricity for those purposes will consume more.

As of January-March 2025, the average household in mainland Britain pays 33.1p per kWh, including VAT, for 2,700kWh of electricity. For 3,100kWh, it pays 31.9p. These amounts will increase to approximately 34.6p as of April 2025.

The Department for Energy Security and Net Zero (DESNZ) calculates that the average price paid by British businesses, as of the third quarter of 2024, is 25.7p, with a range of 21.6p to 29.1p (excluding VAT).

The UK Steel trade association has published indicative figures for British steel works. Those are very large consumers, and are highly sensitive to energy costs; UK Steel’s figures imply an underlying price of 16.2p as of September 2024. Is a range of 16.2p to 34.6p expensive?

Yes – very.

One way of assessing electricity costs is to compare prices in different countries. Generating methods and costs vary, and not all methods can be replicated in every country. A country with low population density, extensive mountains and ample rain can use large-scale hydroelectric generation to provide electricity quite cheaply; that, however, is the exception, and most places must use more expensive methods.

Some thought must be given to foreign exchange rates when comparing electricity costs. The examples that follow feature prices calculated using a combined exchange rate, derived from recent foreign exchange market rates and Purchasing Power Parity (PPP) rates.

In this instance, the reasoning is that electricity costs are typically a mixture of domestic and internationally traded costs; hence the use of a combined rate.

To see what electricity can cost in an efficient Western market, we can consider Texas. Texan households pay an average of 11.3p. Put another way, a Texas householder can expect to pay around one third of the price paid by its British counterpart, and substantially less than a British industrial plant.

The latter point is worthy of pause; it should not be this way. Texan businesses pay even less: an average of 6.3p, and as low as 4p. That is worthy of emphasis: the average price paid by a British business is more than four times greater.

Of course, Texas is famous for its energy resources, particularly its prodigious petroleum industry. Surely, we should not compare Britain with such a place? Yes, we should. To act otherwise is to be myopic and unambitious. However, we should also consider a rather different example.

Japan has long been synonymous with energy scarcity. Its fossil fuel resources are minimal; far smaller than Britain’s. It has effectively been embroiled in a rolling energy crisis since the 2011 earthquake and tsunami. As a heavy importer of energy commodities, it has been highly exposed to the turbulent energy market conditions experienced since the Russian invasion of Ukraine in 2022.

Additionally, Japan’s currency is notably weak at current market rates. That inflates the cost of its energy imports, which are typically traded in American dollars. If any place is likely to feature more expensive electricity than Britain, surely Japan is it?

In fact, no. The average Japanese household consumes 3,120kWh of electricity per annum. Excluding the subsidy currently paid to consumers by the government, such a household pays 20.5p.

Put another way, it pays around a third less than its British counterpart, and less than most British businesses. Japanese businesses, excluding the largest consumers, pay between 12.4p and 20.5p (excluding subsidies). It is estimated that the largest consumers pay less than 12.4p.

Electricity in Japan is certainly not cheap. Its cost is regarded as a problem; hence the current payment of subsidies to consumers. However, the salient point is that it is significantly cheaper than in Britain, notwithstanding Japan’s inherent energy resource disadvantages.

DESNZ publishes annual statistics on the price of electricity for industrial sector consumers in selected countries. The latest set was published in September 2024, with data for most countries up to 2023. Strikingly, the publication includes a league table, ranking Britain relative to 27 other members of the International Energy Agency (IEA).

Britain took the wooden spoon for 2023, which is to say that it had the highest prices; 46 per cent higher than the median IEA member price, taxes included, and 54 per cent higher, taxes excluded. Britain has been languishing near the bottom of the IEA rankings since 2014, having previously tended to be around the middle of the table.

The poor ranking reflects badly on Conservative energy policies between 2010 and 2024. So, too, does the British electricity price record for that period, even if one excludes the surge in energy prices experienced after the invasion of Ukraine. Adjusted for inflation, industrial electricity prices rose by 48.7 per cent between 2010 and 2021. Commercial sector prices rose by 34.3 per cent. Household prices rose by 38.4 per cent.

A stock explanation for higher electricity prices is that the price of natural gas has driven them up. That is correct, but only up to a point. In fact, that explanation is a half-truth, deployed both as a product of ignorance and as conscious deception. Between 2010 and 2021, industrial sector gas prices, adjusted for inflation, rose by 19.2 per cent.

There is quite a difference between 19.2 per cent and the figures set out in the above paragraph. Furthermore, the difference is starker than is immediately apparent, for the effect of a given change in the price of gas is diluted by the other cost elements that contribute to final consumer prices.

Clearly, other factors were at work in inflating electricity prices to such an extent. Between 2010 and 2021, the carbon dioxide emissions intensity of British electricity generation declined by 56.5 per cent. That is not a coincidence; it is a Pyrrhic policy victory. Policy has contributed to the high-cost electricity problem, and different policy is required in order to counter it.

Kemi Badenoch’s recent remarks on the topic are very significant, and herald a profound change. Evidently, the work of developing that policy can now begin.

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