Energy Bills to Increase as Cost of Switching Off Wind Farms Rises

British households are set to face higher energy bills from October as the rising cost of paying wind farms to switch off pushes annual prices up by two per cent. Ofgem, the energy regulator, confirmed that the price cap will increase by £35 a year for the final quarter, raising a typical annual bill to £1,755. The increase, which was larger than anticipated, has been attributed to an upsurge in electricity balancing costs, with the National Energy System Operator levying these charges on consumers to maintain supply and demand across the grid in real time.

Wind farm curtailment has emerged as a significant contributor to the cost pressure. Remote wind farms are being compensated to shut down when their generated power cannot be transported via the national grid due to infrastructure constraints. In tandem, gas plants closer to demand centres are being paid to increase output to compensate for this lost wind energy. This approach has driven costs arising from curtailment and replacement from £631 million at this stage in 2024 to £814 million so far this year, according to Wasted Wind, a tracker managed by Octopus Energy.

Ofgem also noted that a further £17 of the annual increase reflects an expanded levy for the government’s Warm Home Discount scheme. More than six million households now benefit from this measure, following a recent extension which will offer £150 discounts to an additional 2.7 million of the most vulnerable families. These adjustments to the price cap have outweighed a £15 reduction in wholesale costs, a benefit from lower global gas prices.

The price cap, set at £1,755, remains well above pre-crisis levels despite recent falls in wholesale energy markets. Nearly two thirds of British households are on tariffs protected by the cap, which was introduced in 2019 to limit the price charged per unit of gas and electricity by suppliers. Octopus Energy has advocated for regional power pricing to address rising network constraints, but such reforms are yet to be adopted. The company commented that reform is needed to ensure consumers genuinely benefit from low-cost renewables, rather than incurring costs through system inefficiencies.

Energy minister Michael Shanks highlighted that wholesale gas prices remain substantially higher than prior to the Ukraine conflict, referring to the ongoing costs as a fossil fuel penalty. He emphasised the importance of transitioning to domestically generated renewable power to shield consumers from volatile fossil fuel markets in the future.

Ofgem has urged consumers to consider fixed tariffs, which could save over £200 versus the new price cap for some households. However, with energy debt now above £4 billion and many families struggling as colder months approach, household budgets remain under strain. Charities such as Citizens Advice have called for the government to set out further plans to support the most vulnerable as energy prices persist at historically high levels.