The price cap will rise to £1,738 in October, the third increase this year. But a separate, less visible cost is also climbing: UK households are now on track to pay £1bn to subsidise EU energy bills through a cross-border electricity link called the Viking Link interconnector. That is the claim in a report by The Telegraph, based on analysis of National Grid data and capacity market payments.
According to The Telegraph, the interconnector, a 475-mile cable between the UK and Denmark, was built to share renewable power. But the fixed capacity payments paid by UK consumers to keep the link available mean British households effectively underwrite lower prices for Danish and German homes. The total subsidy over the project’s life could reach £1bn.
Who pays, and what it costs a typical 3-bed semi
The cost lands on every household with a standard variable tariff. Ofgem’s capacity market charges roughly £15–£25 per year for a typical 3-bed semi using 12,000 kWh of gas and 3,000 kWh of electricity. Multiply by 27 million homes and you reach the £1bn figure. The interconnector does export UK wind power when prices are low, but the fixed payments are paid regardless of whether the cable is used. Critics, including energy economist Dr. Jan Rosenow of the Regulatory Assistance Project, argue this is a subsidy from UK billpayers to EU consumers, as reported by The Telegraph.
The catch is that UK homes see no direct benefit from the link during peak demand periods. When the UK needs power most, cold winter evenings with low wind, the interconnector often flows electricity to the continent because EU prices are higher. This is the opposite of energy security.
What this means for your EPC and energy bills
An interconnector subsidy does not appear on your Energy Performance Certificate. It does not reduce your heating costs or your carbon footprint. The only way to offset it is to generate and store your own power. Solar panels with a 5 kWh battery can cut grid imports by 60–70%, saving £300–£400 per year on a typical semi. The Smart Export Guarantee pays you for surplus, currently around 5–15p per kWh. Heat pumps, if properly sized and installed, can reduce heating bills by 20–30% compared to a gas boiler, though the upfront cost remains high, typically £7,000–£13,000 after the Boiler Upgrade Scheme grant.
But the subsidy itself is not the biggest cost. The bigger risk is that the UK’s capacity market is misaligned with domestic priorities. Ofgem’s own data shows that capacity payments to interconnectors have risen 40% since 2020, while payments to UK gas plants and batteries have fallen. This tilts the market away from British assets that could actually lower household bills.
What homeowners can do, and what the government should do
For individual households, the immediate action is to reduce reliance on grid electricity. Insulate your loft to at least 270mm, this costs £300–£500 and saves £200–£300 per year. Draught-proof windows and doors for £100–£200. Then consider solar plus storage. The payback period is now 8–12 years with the 0% VAT on installations (until March 2027).
At a policy level, the government should reform the capacity market to prioritise UK-based generation and storage over cross-border links. The Energy Security Bill, currently before Parliament, includes provisions to review interconnector capacity payments. The Energy Saving Trust recommends that households write to their MP and ask for a cap on interconnector subsidies. Ofgem’s next capacity market auction is in November 2025, that is the deadline for reform.
The £1bn subsidy is not inevitable. But it will keep flowing unless UK consumers and regulators demand a system that puts British homes first.
Frequently Asked Questions
The fixed capacity payments add roughly £15–£25 per year for a typical 3-bed semi using 12,000 kWh of gas and 3,000 kWh of electricity. This is on top of the October price cap rise.
No. The capacity market charges are applied to all electricity suppliers, who pass them on to all customers regardless of tariff. Fixed tariffs may offer lower unit rates but still include the subsidy.
