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Gas and electricity prices in 2024

What drives energy prices higher, and will they rise or fall in 2024? Is now a good time to fix your energy tariff? Find out with our UK energy price forecast.

 Man looking at energy bill with smart meter in foreground

Since the start of the year, energy prices have been falling. The energy price cap is set to fall by another 12% in April. And according to analysts Cornwall Insight, prices should continue to drop throughout the summer months. It currently predicts that the July price cap is going to be £1,463. If this happens, this is a further fall of 13% on the April price cap.

Looking further ahead, prices are set to rise again towards the end of the year. Cornwall Insight predicts the October price cap is going to be around £1,521. That’s an increase of 4% on its prediction for July, but still £400 cheaper than it was in January 2024.

Price cap level Annual energy cost for an average usage medium-sized household paying by Direct Debit
1 July to 30 September 2023
1 October to 31 December 2023
1 January to 31 March 2024
1 April to 30 June 2024
Predicted energy price cap (1 July to 30 September 2024)
Predicted energy price cap (1 October to 31 December 2024)

The current energy price cap, which runs until 31 March 2024, is currently set at £1,928. This is based on a ‘typical’ household’s annual usage (2,700 kWh of electricity and 11,500 kWh of gas). From 1 April 2024, the price cap should fall by £238 to £1,690 per year.

The April price cap sees unit costs of both electricity (24.50p per kWh, down from 28.62p per kWh) and gas (6.04p per kWh, down from 7.42p per kWh) fall. However, standing charges for both are going to rise yet again. Electricity’s standing charge jumps from 53.35p per day to 60.10p per day. Gas sees a smaller rise – from 29.6p per day to 31.43p per day. This is because it's more common now to transfer the costs of running the energy networks from the unit prices to the daily standing charge.

Energy prices are volatile because they're influenced by the wholesale cost of gas, and this has been volatile over the last few years. Whole sale prices rose sharply in 2022 and although they’ve since dropped, they're still above 2021 levels. This is because the UK still relies heavily on imported supplies and these are vulnerable to global events. So even though prices are currently falling, they might still rise sharply again in the future.

Why do we have an energy crisis?

The current energy crisis began back in 2021 as the world came out of lockdown. Increased demand for both oil and gas wasn't matched by an increase in supply. As a result, wholesale prices for both gas and electricity rose. This led to a 12% increase in the October 2021 energy price cap to £1,277.

In February 2022, Russia invaded Ukraine. The invasion led to fears of major disruption to energy supplies – particularly in Europe, which was heavily reliant on Russian gas. After Russia threatened to cut supplies to the EU, it moved to source supplies from elsewhere. As a result, gas prices jumped in 2022, affecting the UK as well as the EU.

The energy price cap increased by 54% to £1,971 in April. It would have jumped by a further 80% in October to over £3,500 if the government hadn't intervened with the Energy Price Guarantee. This capped prices at £2,500.

Why is electricity so expensive in the UK?

Although an increasing amount of electricity is generated from renewable sources, some electricity is generated from natural gas. As a result, the wholesale price of electricity is tied to the price of natural gas. This means that when gas prices rise worldwide, so do UK electricity prices.

However, gas price rises weren’t the only factor. Lower electricity production across Europe also helped push prices up. For example, many French nuclear reactors were offline during the summer of 2022, while droughts elsewhere reduced the amount of hydroelectric power being produced.

What makes energy cheaper?

The biggest factor that helps to reduce energy prices is supply. When supply exceeds demand, you see gas prices falling. When supplies dry up, or there is concern over future supplies, prices rise. Prices can also be kept lower by producing more energy locally. This reduces reliance on expensive – and potentially unreliable – imports from foreign countries. Expanding renewable energy sources across the UK in the form of solar, wind, hydroelectric and tidal power hopefully lead to lower prices going forward.

Energy prices are already falling and are expected to fall further over the summer. This is because wholesale gas prices, which started falling in 2023, have continued to drop back closer to pre-crisis levels in 2024. A reason for this is that European gas reserves are higher than expected due to a milder winter as well as healthy supplies of gas.

The April price cap has already seen a 12% drop in prices compared to the start of 2024. Looking further ahead, the cap could fall by a further 13% in July-September before rising again in October in line with increased demand. If predictions are true, the energy price cap is going to fall below £1,500 for the first time since October 2021 in July 2024.

What is the energy price cap per kWh?

The energy price cap per kWh is currently 28.62p per kWh for electricity and 7.42p per kWh for gas. From 1 April this falls to 24.50p per kWh for electricity and 6.04p per kWh for gas.

When does the energy price cap change?

The energy price cap changes every 3 months, and the figure is announced around a month before it happens. The next price cap is due to be announced at the end of May to come into effect in August.

There are many ways in which you can reduce the cost of your energy. They include:

  • Look for a better deal: Use our energy comparison to see if you can save money on your bills by switching to a different tariff or supplier.
  • Pay by Direct Debit: If you pay your bill quarterly by standing order or cheque, try switching to monthly Direct Debit payments for a discount.
  • Switch your meter: There are more tariffs – so more competition and better deals – for standard credit meters than prepayment.
  • Install a smart meter: If you’ve not yet switched, a smart meter allows you to pay closer attention to your energy consumption. You can spot so-called ‘energy vampires’ – switching these off could save around £55 a year according to the Energy Saving Trust.
  • Reduce electricity usage: In addition to removing energy vampires, look for other ways to reduce your electricity usage. Avoid leaving lights switched on, for example, or only boil the water you need.
  • Reduce heating costs: If you’ve not already done so, insulating your home and installing the latest double-glazed windows can make a huge difference to your heating bills. And there are plenty of smaller things you can do to cut bills, from fitting draught excluders to doors to blocking cracks in skirting boards.
  • See if you’re eligible for help: If you qualify, there are several programmes available to help keep your fuel bills down. Find out more with our guides on the Warm Home Discount and Winter Fuel Allowance.
  • Generate your own renewable energy: It’s not a cheap option, but generating your own energy can deliver consistently cheaper electricity for 20 years or more. The electricity can be used at home as it’s generated, stored in batteries for future use, or sold back to the grid.

Should I fix my energy prices?

Choosing a fixed-rate deal has always been about peace of mind rather than automatically cheaper prices. If you want the certainty of knowing how much you could pay for your gas and electricity over the coming year, then a fixed-rate tariff could be the answer.

Right now, with prices falling and predicted to fall even lower over the next few months, some suppliers are offering fixed-rate deals. These are cheaper than their current standard variable tariffs. But while they may look attractive right now, make sure you compare these costs against predicted energy price caps over the next 6 months.

Another consideration: check to see if the tariff comes with an exit fee (most fixed-rate ones do). If it does, and prices continue to fall, you may be tempted to switch again.

But you need to add the exit fee on to the new tariff cost, that's unless your into the last 49 days of your fixed tariff. This gives you an accurate figure to compare with the new tariff to see if switching could actually save you money.

Our energy comparison tool makes it simple to compare suppliers and tariffs. If you find a better deal, we can also help you switch too. Here’s how it works:

  • Find a recent bill: This contains information you may need when you get an energy quote with us, including your current tariff and supplier.
  • Fill in the form: Head over to our comparison tool and click ‘Get started’. Enter some personal details – including your postcode.
  • View and compare tariffs: Once your details are confirmed, you’ll be shown a range of deals. These include both fixed-rate and variable-rate tariffs. Click ‘Plan info’ to read more about each tariff.
  • Make the switch: If you find a tariff you’d like to switch to, click ‘Switch today’ and follow the prompts.

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