The Government is being urged to underline its support for the EV transition by decoupling the wholesale price of electricity from gas to help cut charging prices.

FairCharge says decoupling the wholesale price of gas from electricity from cheaper renewable sources would help everyone by lowering electricity prices

The call comes from EV campaign group FairCharge and the RAC, a founding supporter of the group, as they say it would immediately cut home and commercial energy bills as well as slashing public charging costs.

Under the current system, the wholesale electricity price continues to be set by the unprecedented global wholesale price of gas – pushing up domestic and commercial electricity bills to record levels and hampering drivers’ desire to go electric. Recent RAC research found EV drivers using rapid chargers are paying more to top up their batteries than petrol drivers are shelling out for fuel.

In its July 2022 Review of Electricity Market Arrangements (REMA), the Government opened a consultation on a wide range of options to address the combined challenges of responding to higher global energy costs. This included decoupling global fossil fuel prices from electricity produced by cheaper renewables, in order to help ensure consumers see cheaper prices as a result of lower-cost clean energy sources.

Despite the consultation closing in October, the Government hasn’t yet published the results – and FairCharge and the RAC are calling for urgent action.

The review states that under the current system, gas prices often end up setting the wholesale electricity price because gas-fired power stations are the last source of supply used to meet demand.

But decoupling the two would mean the growing share of electricity generated from cheaper renewable sources would, over time, determine the price more often – bringing down energy costs for businesses, consumers and EV drivers as well as encouraging more people to switch to EVs.

Dr Euan McTurk, advisor to FairCharge and consultant battery electrochemist from Plug Life Consulting Ltd, said it was bizarre that the most expensive form of electricity generation – gas-fired power plants – determines wholesale electricity prices even though it’s other cheaper sources of power, such as renewables, that make up most of where our electricity actually comes from over the course of the year.

“It would make far more sense for wholesale electricity prices – which ultimately dictate what consumers and businesses pay – to reflect where most of the energy is being generated on any particular day. Gas power plants would still be paid what they need to keep operating, but wholesale electricity prices would plummet instantly by several tens of pence per kWh, cutting home and commercial energy bills – as well as public EV charging costs. This could all be done very easily at no expense to taxpayers.”

FairCharge founder Quentin Willson said: “EVs charged at home are still considerably cheaper to run than combustion cars, but prices at many public charge points have increased significantly. Anyone using the public network will now have to pay more, but critically, the rise in costs will reduce EV take-up at a crucial time. Decoupling the wholesale price of gas from electricity from cheaper renewable sources would help everyone by lowering electricity prices. Those lower energy costs will also impact inflation and interest rates. Decoupling should become an essential and urgent part of the UK’s future energy strategy.”

The RAC also called for the Government to publish its consultation findings as soon as possible.

EV spokesperson Simon Williams said: “It’s very important that enthusiasm for electric vehicles isn’t dampened in the run-up to 2030 when the sale of new petrol and diesel cars comes to an end. The fact electricity has gone up in price quite dramatically due in the most part to the wholesale price of gas shooting up as a result of the war in Ukraine is a sign that action needs to be taken to change this for the benefit of households and businesses, and to guarantee the electric car revolution stays on track.”

FairCharge and the RAC are also continuing their campaign to get the 20% VAT charged at public charge points reduced to match the 5% levied on domestic electricity. The two organisations say it’s an unnecessary barrier to switching to an electric car for the estimated third of people who aren’t able to charge an EV at home who have no choice but to rely on the public charging network.

The BVRLA has also now called for the Government to tackle the charging VAT disparity in the upcoming Spring Budget; one of its four key asks to support the nation’s drive to decarbonise.