Energy price decoupling: linked electricity and gas fees are ‘stopping people buying electric cars’

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EV advocates demand ‘urgent’ action to change how wholesale electricity prices are calculated to avoid stalling UK’s shift to electric vehicles

The uptake of electric cars in the UK could be threatened unless the government acts to split the wholesale costs of electricity and gas, campaigners say.

EV campaign group FairCharge says that current high charging costs risk putting drivers off switching to electric models and is calling for ministers to decouple energy prices to help bring a swift drop in bills.

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EV charging costs, particularly at public chargers, have risen sharply over the last year as the impact of the war in Ukraine has sent energy costs spiralling for households, businesses and motorists. The rising cost of electricity along with falling fuel prices is thought to have dampened interest in EVs in recent months.

Currently, wholesale energy prices in Britain are set in line with the costs of the most expensive means of generation. According to academics at University College London, 80% of the time, that is gas-fired stations, even though they account for less than 40% of the country’s electricity supply.

FairCharge and its founding partner the RAC are now calling for the government to urgently decouple the wholesale cost of electricity from gas, arguing that this would allow the growing share of electricity generated from cheaper renewable sources to determine the price more often – bringing down energy costs for everyone.

‘Rise in cost will reduce uptake at critical time’

FairCharge founder and automotive journalist Quentin Willson said: “EVs charged at home are still considerably cheaper to run than combustion cars, but prices at many public charge points have increased significantly. Anyone using the public network will now have to pay more, but critically, the rise in costs will reduce EV take-up at a crucial time.

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“Decoupling the wholesale price of gas from electricity from cheaper renewable sources would help everyone by lowering electricity prices. Those lower energy costs will also impact inflation and interest rates. Decoupling should become an essential and urgent part of the UK’s future energy strategy.”

According to the RAC’s Charge Watch, the average cost of using the fastest public chargers increased by 50% between May 2022 and last month, to 70p per kilowatt hour for rapid and 75p for ultra-rapid.

RAC EV spokesperson Simon Williams said: “It’s very important that enthusiasm for electric vehicles isn’t dampened in the run-up to 2030. The fact electricity has gone up in price quite dramatically due in the most part to the wholesale price of gas shooting up as a result of the war in Ukraine is a sign that action needs to be taken to change this for the benefit of households and businesses, and to guarantee the electric car revolution stays on track.

“We urge the Government to publish its consultation findings [from the Review of Electricity Market Arrangements] as soon as possible, to act on the findings and improve the way the wholesale electricity price is worked out.”

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Greg Jackson, CEO at Octopus Energy Group, added: “Renewables are the lowest cost form of energy generation, and electricity is the most efficient way to power transport and heating. We need prices to reflect this, and Octopus would like to see markets reformed to let customers see the benefits of cheap, green electricity.”

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