The UK’s electricity price is nearly four times the wholesale cost of gas per kWh, a gap that makes heat pumps and electric cars more expensive to run than they should be. Business groups now claim that closing that gap could unlock £130bn in economic benefits by 2050, as reported by BusinessGreen.
What the £130bn figure means for your energy bill
The headline number is a macroeconomic projection, GDP growth, not cash in your pocket. But the mechanism is concrete: shift the environmental and social levies currently loaded onto electricity bills (about 25% of a typical unit cost) onto gas bills instead. Electricity would become cheaper; gas would become more expensive. For a typical 3-bed semi using 3,100 kWh of electricity and 12,000 kWh of gas per year, the net effect depends on how much you use each fuel. Households with heat pumps or electric vehicles, who use more electricity, would see bills fall by £100-200 annually. Those on gas-only heating would see a modest rise of £30-50.
Who qualifies, and who doesn’t
Every household pays levies through their energy bills. Currently, electricity bears the bulk because it’s seen as a ‘green’ fuel and gas is not. The reform would rebalance that. The catch is that the Treasury dislikes raising gas bills, it’s regressive, hitting low-income homes on gas heating hardest. Business groups argue the long-term gain from electrification (lower carbon, cheaper heat) outweighs the short-term pain. Ofgem has not yet modelled the exact household impact, but the Energy Saving Trust estimates that every 1p/kWh reduction in electricity cost makes a heat pump about £150 a year cheaper to run.
What this misses
The £130bn figure assumes the reforms happen immediately and are followed by mass heat pump adoption. But the UK installed only 55,000 heat pumps in 2023, a fraction of the 600,000 per year the Climate Change Committee says are needed. Without a parallel programme to train installers, cut upfront costs (£7,000-£13,000 for a typical air-source heat pump), and simplify planning rules, lower running costs alone won’t drive the switch. The Boiler Upgrade Scheme currently offers £7,500 towards installation, but applications are capped at 50,000 per year. Reforming electricity pricing without expanding that grant risks leaving the benefits on the table.
What to do now
Homeowners should watch the Autumn Budget and the next Ofgem price cap announcement (due in February 2026) for signs of levy rebalancing. If electricity costs drop relative to gas, the payback period for a heat pump shortens by roughly two years. For now, the cheapest way to cut your electricity bill is to reduce consumption: LED bulbs, draught-proofing, and smart controls cost little and pay back in months. If you’re planning a heat pump, wait for the next price cap announcement, but don’t delay beyond 2026, as grant caps may tighten.
Frequently Asked Questions
Not automatically. The reform would lower the unit price of electricity but raise the unit price of gas. If you use more gas than electricity (typical for gas-heated homes), your total bill could rise slightly. Homes with heat pumps or EVs would see net savings.
The government has not set a date. Business groups are lobbying for inclusion in the next Spending Review, due in spring 2025. Ofgem would then need to consult on tariff structures, meaning any change is at least 12-18 months away.
