Here’s something that surprises a lot of people when they first hear it: even on the days when wind and solar are generating more than half of Britain’s electricity, your bill is largely set by the price of gas. Not a bit influenced by it. Set by it. And that’s been one of the most frustrating structural problems in UK energy policy for years.
The good news is that the government announced reforms in April 2026 to change this. The less good news is that “announced reforms” and “lower bills” are separated by several years of implementation. But if you’ve got solar panels, a heat pump, a home battery, or you’re thinking about getting any of the above, the direction of travel matters to your long-term calculations.
Why Gas Sets Electricity Prices
It comes down to how Britain’s wholesale electricity market works. Generators bid into the market, and the price is set by the most expensive generator needed to meet demand — which, on most days, is a gas-fired power station. Every generator gets paid that price, whether they’re running on gas, wind, or solar. It’s called marginal pricing, and it made sense when most generation was from gas or coal. It makes much less sense now that a significant chunk of generation is from renewables with near-zero running costs.
The result is that when gas prices spike — as they did dramatically in 2021 and 2022 — electricity prices follow, even if the actual electrons going through your smart meter came from offshore wind. Consumers and businesses pay for gas price volatility they have no control over and that has nothing to do with how their electricity was actually generated.
The Renewables Obligation, which is a subsidy mechanism that gets passed on to consumers’ bills, adds further complexity. Historically, about 25 percent of what you pay per unit of electricity is policy costs — grid levies, subsidies to generators, social obligations. That’s been a longstanding source of frustration, particularly for people who’ve invested in electric heating and end up paying disproportionately compared to households still on gas boilers.
What the April 2026 Reforms Actually Say
The government’s announcement in April set out a package of measures with a stated aim of decoupling the wholesale electricity price from gas. The core of it is introducing a form of two-part pricing — a revenue stabilisation mechanism for renewable generators that would give them a guaranteed return based on their actual cost of production rather than the gas-set market price. The excess revenue (when gas prices are high) would be recycled back to reduce consumer bills.
This is similar in principle to the Contracts for Difference model already used for new renewable generation, but extended more broadly across the existing fleet. The detailed consultation on implementation closed in May, and the earliest this could take effect in a meaningful way is 2027 or 2028.
The other element of the April package was a commitment to reduce policy costs on electricity bills by 2029 — specifically, shifting some of the renewable energy subsidy costs from electricity to gas bills. The argument is that if you’re actively using a high-carbon fuel, you should bear more of the cost of financing the transition away from it. In practice, this would reduce the electricity standing charge and per-unit rate, while increasing the gas equivalent. For homes that have already switched to a heat pump and don’t use gas, that’s unambiguously good news.
What This Means If You Have Solar or a Battery
If you’ve bought solar panels partly for the export income through the Smart Export Guarantee, or you’re running time-of-use arbitrage with a home battery, the current high electricity price works in your favour. You export at rates tied to the wholesale market, and you import at prices set by Ofgem’s price cap — both of which are higher than they’d be in a reformed market.
That’s not an argument against investing in clean energy technology. The capital cost of solar panels and batteries has fallen significantly, the running savings are real, and the SEG rates available through some suppliers remain strong. But it’s worth being realistic: one of the effects of successful price reform is that the electricity you’d be arbitraging across would be cheaper. The spread between off-peak import and peak export rates might narrow.
The bigger picture for heat pump economics is more straightforwardly positive. Heat pumps are competitive when electricity costs roughly three to four times gas per unit. At current prices, electricity costs about four times gas in the UK, which makes a heat pump broadly break-even in running costs versus a new gas boiler. If electricity prices fall relative to gas through this reform — which is the explicit intent — that ratio improves and the running cost case for heat pumps strengthens.
The Timeline, Honestly
The government has a track record of announcing energy policy reforms and implementing them slowly. The decoupling measures are not going to show up on your October 2026 Ofgem price cap. They require primary legislation, detailed implementation by Ofgem, and changes to how the electricity market operates — none of which happens quickly.
A realistic timeline sees some impact on the policy-cost element by 2028–2029 and the fuller pricing reform taking longer. That’s still meaningful if you’re making a 20-year investment in a heat pump or a 25-year calculation on solar panels. But it’s not a reason to hold off on a decision that makes sense today, waiting for bills to fall before committing.
The structural direction is clear and is broadly supported across the main parties. Britain needs cheap, reliable renewable electricity to hit its clean energy targets, and you can’t have cheap renewable electricity while the price is set by gas. The reform will come. It just won’t come as fast as anyone would like.