The renewable hostile takeover

It's a hostile takeover. Gas has long been in control of our energy system. We are at its whim. But its grip is weakening because another energy market is quietly emerging.

Gas balances the electricity supply. When we all go for a tea break, it provides the extra power. That earns it the privilege of setting prices. Even if most was produced from the sun or the wind. Some generators have been making outsize profits. We've all had higher bills.

We have another way to pay generators to make electricity, known as Contracts for Difference. It's a complicated mechanism but we end up with low-carbon electricity bought at a fixed price for 15 years. The contracts are a strong signal for renewable developers to keep building.

Because renewables are now cheaper, fixed price contracts mean lower & less volatile prices. Now more Contracts for Difference are getting signed. The influence of gas is getting diluted.

Around 8% of our electricity was generated through these contracts in 2022. In 5 years, it will be closer to 30%, but potentially much higher. Wild swings in the price of gas or carbon will get blunted. Our bills will be lower. The incentive to electrify our home heating will be even stronger.

The low-carbon coup is already underway.