Today's energy price cap announcement is unwelcome news. Energy bills are set to rise once again from July, driven by the war in Iran and the return of volatile gas prices.

The rise in bills should come as no surprise. Our energy system remains far too dependent on gas: it remains the dominant way we heat our homes, and it still plays a major role in setting electricity prices. As long as that's true, households will remain exposed to the kind of international price shocks we are seeing right now. This energy crisis is not over and for many households the most painful months are still ahead.

But buried beneath the grim headline is some genuinely encouraging news: the first signs that electricity prices may be beginning to decouple from gas. This is a tentative sign that the UK government's clean power mission is working. For the first time in a major energy crisis, electricity prices are not just tracking gas prices upward in lockstep, and it’s thanks to clean energy.

The analysis below sets out what the price cap tells us, and what should follow from it.

The primary driver of today's price cap increase is gas. International wholesale gas prices have spiked in response to the US and Israel’s war with Iran, and because around 85% of UK homes still heat with gas boilers, that spike flows directly into household bills.

Summer bills are structurally lower than winter ones given reduced heating demand, but autumn bills will be severe, particularly for high-consuming households and those in poorly insulated properties. Based on the prices announced today, a typical dual fuel home’s annual bill would be £1,862, a 13.5% increase from January this year.

Our analysis shows that all households will pay more for their bills due to price cap changes. However, this increase varies depending on the heating system households have in their home, with those more reliant on gas being impacted more significantly.

The heat pump households in that chart are worth pausing on. A typical heat pump user will see a much smaller bill increase than an equivalent gas boiler household – because heat pumps use around 3.5 times less energy to produce the same amount of heat. The technology exists but the transition is not happening fast enough.

For over a decade, UK electricity prices have moved almost perfectly in sync with gas prices – a structural consequence of gas-fired power stations setting the marginal price of electricity at the wholesale level. When the 2021–22 energy crisis hit, that relationship was unambiguous: gas prices rose sharply, and electricity prices followed in near-identical proportion.

Our analysis shows something different is happening in the wake of this energy crisis. Electricity costs have risen by only 6% in this price cap, roughly a quarter as much as gas prices have risen. This suggests that electricity prices may be beginning to decouple from gas, which is one of the key aims of the UK government’s Clean Power 2030 plan.

Why the decoupling? A key part of the answer is that, as Britain has built more solar and wind power, the electricity grid has to rely less often on gas-fired power stations, which usually have the highest marginal cost. This helps lower spot prices for electricity (how much you pay for electricity if you need it right now), which in turn makes the rise in gas prices less important. On top of this, Contracts for Difference, which set a fixed price for many renewables generators, are more favourable when the gas price spikes, helping to stop electricity bills rising.

This is genuinely positive news. We will have to wait to see whether this trend continues over time, but it is an early sign that the UK government’s approach may be working.

Today's price cap is a mixed picture. The clean power mission is starting to show up in the difference between electricity and gas prices – and that matters for the long-term electrification mission. But millions of households remain exposed to gas price volatility, and this energy crisis is going to be difficult for many of them.

The lesson is not complicated. Electrification is the only thing that will make UK households structurally resilient to international energy markets. Every heat pump installed, every gas boiler not replaced, every planning delay and every missed efficiency measure will impact future crises as much as this one.

Today's price cap underlines the urgency of three things that we set out in our policy brief on how to respond to an energy crisis.

1. In the short-term: help households cut their gas use now. The fastest and cheapest way to protect households this winter is to reduce how much gas they burn. A national energy efficiency advice campaign – vigorously promoted, backed by incentives like zero VAT on DIY insulation materials – could save millions of households at least 10% off their bills before winter. There are also emergency options to shift electricity demand away from peak periods.
2. This summer: accelerate electrification while engineers have capacity. The period between now and the autumn is precisely when installers are less busy and supply chains have headroom. The UK government should temporarily increase the Boiler Upgrade Scheme grant, urgently remove planning constraints for heat pumps and solar, boost installer training capacity, and actively promote air-to-air heat pumps as a lower-cost entry point.
3. In the longer-term: lock in stability, not just lower prices. The structural fix is to ensure the ratio of electricity-to-gas prices stays low enough that switching from a gas boiler to a heat pump is unambiguously cheaper on lifetime costs. A target ratio – no higher than 2.9 – combined with a gas price stabiliser with a ceiling and floor could smooth future volatility and prevent the next international crisis from landing on UK household bills in the same way.