Despite the UK generating most of its electricity from low-carbon sources, household energy prices continue to rise, driven largely by global gas prices. The structure of the electricity market ties wholesale prices to gas-fired generation, causing low-carbon utilities to sell energy at inflated rates during gas price spikes. A proposal known as 'Pot Zero' seeks to remedy this by separating older low-carbon generators into a distinct pricing category, potentially lowering retail prices. Advocates argue it addresses market inconsistencies, while critics caution against disrupting existing investment frameworks.
The UK electricity market sets wholesale prices based on the most expensive generator, typically gas-fired power, despite the majority of electricity now coming from low-carbon sources.
Household energy prices in the UK are significantly affected by global gas prices, highlighting a disconnect between low-carbon electricity generation and retail electricity costs.
The 'Pot Zero' proposal aims to change the pricing structure within the electricity market, moving older low-carbon generators to a separate category to alleviate price pressures on consumers.
Critics of the current system warn against retrospective changes that could disrupt investor confidence, highlighting a balance needed between reform and maintaining market stability.
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