2023 was the cleanest year ever for electricity production in Britain. Emissions from the power sector fell by 22% compared to 2022, the largest decline in seven years. This was driven by less fossil fuel being burnt, with their share of electricity demand fell to an all-time low of just 33%.
Gas power generation fell by a fifth, in part because demand was lower (by 5 TWh) but mostly because Britain switched from exporting (4 TWh in 2022) to importing (24 TWh in 2023) from its neighbours. Coal output also fell to just 3 TWh – or 1% of Britain’s electricity, making it the smallest source of generation on the power system for the first time ever. By October, the UK’s last coal power station will permanently shut.
Much of the change is due to increased electricity generation in France. Last year the French nuclear fleet suffered widespread outages, meaning France had to import from Britain and its other neighbours. Now that many of these reactors are back online, France is once again exporting to the rest of the continent. The same cannot be said for Britain’s nuclear fleet. Output fell by 14% last year, to its lowest since 1982.
L: The annual electricity generation and trade mix in 2023 compared to 2022.
R: Annual carbon emissions from electricity generation since 2010
The cost of living crisis made 2023 a tough year for many. Much of the pressure on households and businesses came from the rise in energy prices during 2021-22. However, wholesale electricity prices have fallen 80% since their peak in August 2022, from £353/MWh to £66/MWh in December 2023.
This has only just started translating into consumer bill reductions. Ofgem’s current energy price cap puts the average household bill for gas and electricity at £160 per month, only 23% lower than people were paying one year ago at the height of the crisis. This fall is masked by the effect of the Government’s energy price guarantee. Without that, average bills would have risen to over £350 per month, and so bills have effectively fallen 55% from their peak. Cornwall Insight predicts that average household bills will fall this year, by 16% in April, and a further 8% in July, to reach £125 per month in the summer. The average bill during 2019-20 was just shy of £100 per month, so energy markets will finally be almost back to normal.
Looking ahead to 2024, analysts forecast that wholesale prices will continue falling as the gas market continues to correct itself, which will mean further reductions to household bills going into 2025. However, there is plenty to be uncertain about, with war in Europe and the Middle East potentially disrupting fuel shipments, continued delays to the Hinkley Point C nuclear reactor, and elections on both sides of the Atlantic – all of which could have profound implications for UK energy prices.
Monthly average wholesale prices for electricity, natural gas and carbon dioxide emissions in the UK.
Pink bands show the average range of prices during the 2010s for context.
