Electricity prices are going up alarmingly, especially in the US and UK. Again, I have found myself embroiled in an argument about the price of energy that (exhaustingly and inevitably) always seems to reduce to a fight about renewables.
Electricity prices have become the world’s favourite blame game because an electricity bill is basically a Rorschach test: you stare at it long enough and eventually you see your least favourite ideology staring back at you.
But if you strip away the shouting, the story is fairly consistent across the US, the EU, and the UK: first, fossil-fuel shocks (especially gas) punched the system in the face. Secondly, networks and resilience upgrades are getting seriously expensive. Thirdly, the clean-energy transition is both helping (cheaper energy at the margin) and hurting (big up-front system costs), depending on where you look in the bill.
A retail electricity price isn’t just what it costs to generate power. It is generation, transmission, distribution, taxes, levies, market rules, and financing costs. Simple narratives about cause and effect do not do justice to the complexities of the energy business. This matters because political arguments usually pick one slice of the bill and pretend it is the entire debate.
The European and UK experience
In the UK and much of Europe, the ‘big bang’ moment was the 2021–2022 gas shock, turbocharged by Russia’s invasion of Ukraine and the scramble for alternative gas supplies. The European Parliament’s briefing on the crisis points out that high gas prices had a ‘contagious effect’ on electricity prices because of the ‘merit-order’ (marginal pricing) system: the last (most expensive) generator needed to meet demand often sets the wholesale price – and in 2022, that was usually gas (sometimes coal).
That is the core of the complaint: ‘Why is my electricity priced like it’s made of gas when half the grid is renewable?’. Even if wind and solar are producing lots of cheap electricity, gas can still set the price for the marginal unit at many hours – so the gas spike drags the whole market up.
In the UK, you can see how the hangover lingers even after wholesale markets calm down. A UK Parliament research briefing notes that typical bills under the January–March 2026 price cap are still 45% higher than in winter 2021/22, despite the falls since late 2023/2024. Furthermore, a Reuters fact-check addressed one popular claim – that price-cap rises were driven by ending coal power – concluding that this was incorrect; the key driver was wholesale gas, not coal closures.
If you lean right, you are liable to blame Net Zero policies. The argument goes: subsidies and mandates for renewables, carbon pricing, and the early retirement of coal (and sometimes nuclear) made the system fragile and pricey. Add a spicy garnish of ‘bureaucrats blocked domestic drilling’ and you have the full plate of blame.
If you lean left, you are likely to blame fossil fuels. Gas is volatile, globally traded, and geopolitically flammable – so tying electricity pricing to gas was a design flaw, and consumers got mugged by fossil market chaos. Some also point at privatised or fragmented markets and the reliable ‘windfall profits’ for certain generators and traders.
However, a more prudent view is that the design of energy markets imposes hedging lags. Wholesale prices move fast, but retail bills move slowly because suppliers hedge and regulators smooth changes, and because network and policy costs do not magically shrink when gas does.
The US market is different. The EIA (Energy Information Administration) notes that US retail electricity prices have risen faster than inflation since 2022. Their major observation is that utilities are spending more on capital investment to replace or upgrade ageing generation and delivery infrastructure.
Three reasons are offered for this. The first is that extreme weather (hurricanes, heatwaves, and fires) has catalysed ‘resilience spending’. Utilities harden their systems, and regulators often let them recover those costs through rate increases. The second is gas: where power is gas-heavy, electricity prices follow gas.
The third is a new political football: LNG exports. A Financial Times piece frames the debate as: are expanding LNG exports linking US gas (and therefore some electricity prices) more closely to volatile global markets? It is likely that exports tighten the market and lift domestic prices at the margin.
The political response in the US is somewhat different to that of its UK counterparts. If you are right-leaning, you blame regulation – EPA rules, renewable mandates, and restrictions on pipelines or transmission siting – all allegedly raising costs and forcing premature plant closures. If you are left-leaning, you blame utilities and fossil interests – monopoly utilities overbuilding rate-base projects and underinvesting for decades before sending the invoice, plus the old chestnut of ‘excessive profit’.
The middle ground is that the grid is old and the climate is rude. Even if you think every policymaker is incompetent, physics still dictates that you need to replace equipment, add capacity, and protect it from increasingly nasty weather.
The Role of Renewables
This is where everyone talks past each other because two things can be true at once. Renewables can lower wholesale prices; wind and solar have very low marginal costs, so they tend to push expensive generators out of the stack. On the other hand, renewables can raise system costs, especially during transition. To run a grid with lots of wind and solar, you need transmission to windy and sunny places, storage, flexibility, balancing services, and sometimes backup generation.
If you do not build the grid fast enough, you get the truly absurd outcome of paying for clean power and then paying it to go away. The UK is the poster child for this particular flavour of madness. Britain has faced rising balancing and constraint costs partly because the grid cannot always move Scottish wind to where demand is. The National Energy System Operator reports wind curtailment rising to 13% of hypothetical wind output in 2024/25. Recent reporting highlights wind farms being paid to switch off because cables are not ready, while other plants switch on elsewhere.
So, when someone says ‘renewables made power expensive’, what they often mean is we built generation faster than the grid and flexibility to use it efficiently. That is not a slap at renewables so much as the reality of forecasting, sequencing, permitting, and planning in a fast-moving, tech-driven generation market.
The unsatisfying conclusion is that everyone is partially right. Electricity got more expensive because fossil-fuel volatility spiked costs, and then we started rebuilding the world’s most complex machine (the grid) while it was still running.
The left is right that fossil volatility has been a ‘price grenade’. The right is right that the renewables transition has real costs and can be mismanaged. And the technocrats are right that a bill is mostly infrastructure, financing, and rules – not just the cost of electrons. Cheap clean generation is necessary but not sufficient; the price people feel is determined by how quickly energy techs, regulators, and planners can properly plan for the future.
Steven Boykey Sidley is a professor of practice at JBS, University of Johannesburg and a partner at Bridge Capital and a columnist-at-large at Daily Maverick, Daily Friend and Currency News. His new book “It’s Mine: How the Crypto Industry is Redefining Ownership” is published by Maverick451 in SA and Legend Times Group in UK/EU, available now.
(image: reve.art)
The views of the writer are not necessarily the views of the Daily Friend or the IRR.
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