Fixing the Price: How a Single Buyer Model Could Slash UK Electricity Prices and Build Consent for the Clean Power Mission

Key Points

Britain’s electricity market was designed for a fossil fuel age, but is now a barrier to a lower cost, low carbon future. Gas plants account for barely a quarter of generation but still set the national marginal price nearly 80 per cent of the time. This magnifies the impact that fossil fuel price shocks have on bills.
The Government should instruct the National Energy System Operator (NESO) to act as a single buyer of power, moving legacy low carbon assets out of the wholesale electricity market and onto Power Purchase Agreements at prices reflecting their original business case. Gas plants should be moved into a strategic reserve subject to central dispatch at cost by NESO, lest they widen their margins as they generate less but become more indispensable to the Balancing Mechanism.
In time, NESO should govern the whole national system through central dispatch, avoiding the growing thermal constraint costs that, in the current system, result from the self-dispatch of generators selling into national markets without regard to network constraints. Currently NESO lacks control over dispatch outside of a narrow half-hour Balancing Mechanism window.
Given severe underinvestment in network capacity, power decarbonisation risks hitting bills hard unless storage and demand side flexibility (DSF) are rolled out cheaply and at scale. The single buyer should act as bulk procurer of DSF, overcoming the recognised coordination problems that threaten serious under-delivery relative to NESO’s optimistic forecasts.
Further savings could be realised on levelised cost of storage (LCOS) by reducing the risk premium attached to the financing of lithium-ion batteries and long duration energy storage (LDES) under merchant or cap-and-floor regimes.
Our preliminary rough estimates suggest that, depending on the path of scenarios around wholesale prices and the delivery of flexibility under current policies, aggregate savings from this programme could amount to £10-–16 billion annually in 2030, or a £125–200 reduction to household bills. This would close the gap on the Government’s pledge to cut bills by £300 a year.

Summary

Key issues and problem statement

UK electricity prices remain among the highest in the world, despite the growing penetration of low marginal cost renewables. The wholesale market — designed for the fossil fuel era — allows gas to set the electricity price 80–90 per cent of the time while contributing barely one quarter of power volume, generating massive windfall profits for legacy generators during price spikes. These high prices are becoming politically toxic for Labour’s Clean Power 2030 plans and are a key source of hardship for households and businesses. The 2026 Strait of Hormuz crisis has further elevated prices and risks, making urgent reform unavoidable.

Savings scenarios

To capture the interaction between the 2026 Hormuz geopolitical price shock and the depth of reform, we model three scenarios. All scenarios assume the CP2030 decarbonisation target is achieved by 2030.

[.num-list][.num-list-num]1[.num-list-num][.num-list-text]Low scenario: moderate price spike, rapid normalisation[.num-list-text][.num-list]

The Hormuz crisis resolves quickly. Wholesale electricity averages ~£100/MWh in 2026, returning to pre-crisis trajectories (~£75/MWh by 2030). The Further Flex and Renewables (FFR) pathway is achieved.

Total cumulative savings 2026–2030: £44.3bn.

[.num-list][.num-list-num]2[.num-list-num][.num-list-text]Central scenario: sustained disruption, gradual recovery[.num-list-text][.num-list]

A more sustained disruption keeps prices at ~£120/MWh across 2026, easing to ~£90/MWh by 2030. The FFR pathway is delivered, with the Single Buyer crucial in avoiding moderate flexibility under-delivery.

Total cumulative savings 2026–2030: £58.6bn.

[.num-list][.num-list-num]3[.num-list-num][.num-list-text]High scenario: extreme disruption, permanent damage[.num-list-text][.num-list]

Prices average £148/MWh across 2026, with lasting structural damage from the Ras Laffan LNG outage keeping prices persistently elevated (~£100/MWh by 2030). Without the Single Buyer, sustained crisis conditions force the system onto the higher-cost New Dispatch (ND) pathway.

Total cumulative savings 2026–2030: £105bn.

[.fig][.fig-title]Figure 1: Wholesale Price Savings Are Front-Loaded, While Additional Savings From Direct Dispatch Procurement Emerge Later[.fig-title][.fig-subtitle]System and household savings under low, central and high scenarios[.fig-subtitle][.fig]

[.notes]Source: Author's calculations.[.notes]

Household savings

Domestic users account for approximately 35 per cent of electricity consumption across 28 million GB households. Annual per-household benefits in 2030 range from £130 (low) to £268 (high), with cumulative per-household savings over 2026–2030 of £553 (low), £733 (central) and £1,312 (high). The central and high scenarios significantly narrow the gap to Labour’s £300/year pledge.

Conclusion

The Single Buyer is not a radical departure — it revives proven principles of coordination and public accountability, updated for the renewables age. With the Hormuz crisis demonstrating once again the cost of fossil fuel dependence, this reform offers a once-in-a-generation opportunity to cut bills, end gas price exposure and rebuild public consent for the clean power mission.

This report develops the policy recommendations we first outlined in our March briefing, "Crude Awakening: Averting the Unfolding Energy Crisis by Decoupling the Price of Electricity From Gas".

Footnotes