Europe’s addiction to gas-fired power plants could cost the average UK household an extra £103 a year on electricity bills by 2027. That is the central finding of a new analysis by the Institute for Energy Economics and Financial Analysis (IEEFA), which warns that the continent’s slow shift away from gas leaves consumers exposed to volatile fossil fuel markets.
As reported by the Institute for Energy Economics and Financial Analysis (IEEFA), the €120 figure is a conservative estimate based on current gas price projections. The real cost could be higher if geopolitical tensions or supply disruptions push prices up again.
Who pays the price, and why it matters now
The UK is more exposed than most European countries. British electricity generation still relies on gas for around 40% of its output, according to National Grid data. That means every spike in wholesale gas prices feeds directly into household bills via Ofgem’s price cap. The cap already rose by £63 in October 2024, and further increases are expected if gas markets tighten.
Households on standard variable tariffs, roughly 80% of UK homes, bear the full brunt. Those with fixed-rate deals are shielded temporarily, but when those contracts end, the jump can be brutal. A typical 3-bed semi using 3,100 kWh of electricity a year would see an extra £8.60 a month under the IEEFA scenario.
What this misses, the insulation elephant
But the IEEFA analysis focuses on generation costs alone. It does not account for the UK’s notoriously leaky housing stock. The average English home loses heat three times faster than a Swedish one, according to the Energy Saving Trust. That means even if electricity prices rise by €120, a well-insulated home with a heat pump will use far fewer kWh than a draughty one with resistance heaters.
The catch is that most UK homes lack basic insulation. Only 18% of homes have loft insulation to the recommended 270mm depth, and cavity wall insulation is missing from around 8 million properties. Without addressing fabric efficiency, any price rise hits harder.
What UK homeowners can do, and by when
The Boiler Upgrade Scheme now offers £7,500 grants for air-source heat pumps, reducing upfront costs by roughly a third. Solar panels, combined with battery storage, can cut grid electricity use by up to 70% on sunny days. Both measures improve EPC ratings by one to three bands, which can add 5-14% to a home’s resale value, according to Rightmove data.
Households on means-tested benefits can access the Great British Insulation Scheme, which covers loft and cavity wall insulation at little or no cost. The scheme runs until March 2026, but applications are processed on a first-come, first-served basis. Energy suppliers also offer free or subsidised LED bulbs and smart thermostats through ECO4 funding.
The cheapest fix, however, is behavioural. Turning down the thermostat by 1°C saves about £80 a year on gas bills, the Energy Saving Trust estimates. Combined with a smart meter, that small change alone can offset half of the projected IEEFA increase.
Who qualifies, and who doesn’t
Heat pump grants are available to all owner-occupiers in England and Wales, but not to landlords or social housing tenants, a gap that affects 4.5 million households. Off-gas-grid homes, which often rely on expensive oil or LPG, stand to save the most by switching to a heat pump, yet they face higher installation costs because of the need for larger radiators or underfloor heating.
The government has not confirmed whether the Boiler Upgrade Scheme will be extended beyond 2028. Industry groups are lobbying for a £10,000 grant to cover the full cost of heat pump installations in hard-to-treat homes.
The IEEFA report shows that Europe’s energy transition affects every UK bill payer. It lands on your doorstep. Households that act now, by insulating, electrifying, or fixing a tariff, can lock in savings before the next gas price spike arrives.
Frequently Asked Questions
You can check eligibility through the Ofgem website or the Energy Saving Trust. Most owner-occupied homes in England and Wales with a valid EPC (no outstanding recommendations for loft or cavity wall insulation) qualify for the £7,500 Boiler Upgrade Scheme grant. You must use an MCS-certified installer.
Yes, because better insulation reduces the amount of energy needed to heat your home. The Energy Saving Trust estimates that cavity wall insulation saves around £315 a year on gas bills, and loft insulation saves up to £225. Combined with a heat pump, these savings can offset any gas-driven electricity price increases.
