The UK government have released a consultation on their new Reformed National Pricing (RNP) plan to counter rising energy costs in the UK.
I’m working my way through the 80 page document, to understand what exactly the government are consulting on, but a piece of information caught my eye in a bad way. The government are predicting that, without government intervention, energy constraint costs will rise from £1.3bn in 2024/25 to around £7bn by 2030/31!
What are Energy constraint costs?
“Energy constraint costs” are comprised of just two costs. The first, the amount we pay wind turbines to turn off, to stop the grid overloading. We do this when National Grid are concerned that there will be too much electricity on the grid for the demand, usually in the evenings. In 2024/25 this was an estimated £370m cost that went onto our bills (roughly £12 per year for each household).
The second energy constraint cost is the additional cost of firing up gas-fired power stations when National Grid is concerned that we won’t have enough energy in the system to keep the lights on across the country. This accounted for £910m in 2024/2025 (roughly £30 per year for each household).
How does the Government prediction affect my bills?
The government’s RNP constulation document discusses what they predict energy constraint costs will likely rise to without government intervention. They believe these costs will rise to roughly £7bn per year by 2030, potentially as high as £10bn, as you can see in the graph below. The blue shaded in area is the possible uncertainty range.
So what does £7bn (or even £10bn) of potential energy constraint costs mean for you? Well, there are roughly 30 million homes in the UK and these costs are split amongst them all. The £1.3bn in 2024/2025 hit your bills as about £42 across the year.
The simple maths on this is that £7bn is almost £6bn more than the cost in 2024/2025. £6bn split amongst 30 million homes is an additional £200 each year on each of our energy bills.
If the costs rise as high as £10bn, you can expect your energy bills to increase by £300 per year rather than £200. And remember, this is just the cost of energy constraint, it doesn’t actually pay for any gas or electric, so it’ll likely be on your standing charges.
A little greed goes a long way
Ironically, some of the time we pay both of these energy constraint costs due to greedy gas-fired power stations. Wind turbines cannot generate enough electricity alone to power the entirety of the UK, and power stations know this so they have a lot of leverage. It’s also important to know that once a gas-fired power station turns off, it has to remain off for a minimum of 6 hours, for safety reasons, maintenance and regulatory compliance.
Gas-fired power stations, during Covid and the first energy crisis from 2020-2023, were threatening to turn off in the afternoons if National Grid didn’t agree to keep using gas-fired power station electricity in the evenings, and to pay higher costs for that electricity. Peak electricity usage in the UK is usually between 5pm and 8pm, when people get home from work and cook dinner, so we need the power station electricity then, therefore National Grid had to agree to pay the higher costs and use the power station electricity late into the night. This is the largest energy constraint cost.
On top of that, the later we get into the evening, the less electricity we need. As National Grid were being strong-armed into using power station electricity, they ran the risk of overloading the grid, so National Grid would pay the wind turbines to turn off, curtailing the amount of electricity being supplied in the evening. So, we would pay that cost as well.
Power stations were doing this a lot in the winter of 2022/23, we saw energy constraint costs rise to over £4.5bn that year… remember how expensive energy was back in 2022/23?! Can’t blame all of it on Russia, some of it was just our greedy powerstations!
Next Steps
I’m reading the consultation document and will be my best to get a response sent out before the due date of 2 June 2026.
I’ll share my response with you all, as always. If you’d like to get involved, please feel free to use my response as your own, or to edit it. Alternatively, you can read the consultation document on the .gov website here: Reformed National Pricing (RNP): delivery plan
Thanks all,
Richard Winstone
The Regulator Guy.
