The Hidden Cost Pushing Up Your Electricity Bill: Carbon
The Hidden Cost Pushing Up Your Electricity Bill: Carbon
Carbon pricing is adding to the cost of gas-fired electricity generation, creating another source of pressure on UK electricity bills.
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ENERGY CONSULTANCY OF THE YEAR
Publish Date:
October 1, 2026
Key Market Drivers & Fundamentals
The Hidden Cost Pushing Up Your Electricity Bill: Carbon
This one doesn’t make headlines the way a war does, but it’s quietly adding real cost. Most UK electricity is still generated, at least some of the time, by burning gas, and gas power stations have to pay for every tonne of carbon dioxide they emit through a carbon trading scheme. When that carbon price rises, so does the cost of generating electricity, and that cost gets passed through to bills.
AND IT HAS BEEN RISING
European carbon prices hit their highest level since January in late August, and UK carbon prices are following a similar trend. Traders are explicitly linking this to the same energy tension and geopolitical nerves discussed above, it’s not a separate story, it’s part of the same one.
THE REASSURING PART
This is entirely a price story, not a “will the lights stay on” story. The UK’s electricity system has plenty of physical capacity for this winter, the grid operator’s own outlook confirms that. If costs rise, it’s because of generation costs, not because there isn’t enough of it.
Energy Market Report Q4 2026
How Can Advantage Help?
Our sustainability department continue offer an ever-increasing range of products and technology aimed at reducing energy consumption and associated costs as well as driving down carbon emissions. We will of course continue to keep you updated around these initiatives, but please do reach out to your designated point of contact should you wish to explore your options in this regard.
In terms of procurement, we will of course continue to monitor markets with a view to helping customers navigate the unprecedented circumstances and ascertain when constitutes the best time to seek a contract extension.
Our popular flexible procurement options continue to be an option for an increasing number of clients on either a standalone basis or as part of a grouped basket. This often facilitates access to day/month ahead trading markets which have proved to be particularly beneficial to many clients over the winter period.
BULLISH IN Q4
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IRAN WAR AND GEOPOLITICAL FALLOUT
COMPETITION FOR LNG (GEOPOLITICS & EL NIÑO)
LOW EUROPEAN STORAGE
POLITICAL & ECONOMIC INSTABILITY AND UNCERTAINTY
RUSSIA/UKRAINE WAR
RISING CARBON
RANGEBOUND IN Q3
OCTOBER BUDGET
VOLITILITY & UNCERTAINTY
ANY FURTHER NORWEGIAN UNPLANNED OUTAGES
RE-OPENING STRAIT OF HORMUZ
MIDTERMS AND AFTER-EFFECT
BEARISH IN Q3
MILD LEANING UK WINTER
HEALTHY WINTER ELECTRICITY SYSTEM
WHOLESALE FUTURES PRICES, 28 & BEYOND
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