3rd June 2026
The issue is one of the biggest political and economic debates in the UK and Europe today.
Consumers often ask, "If Scotland is generating lots of electricity from wind and hydro at very low operating cost, why am I still paying prices linked to expensive gas?"
The answer lies in how wholesale electricity markets are designed.
The current system: marginal pricing
In the UK, electricity is generally priced using a "marginal pricing" system.
If demand at a particular moment requires:
wind farms costing perhaps £10-20/MWh to operate,
nuclear stations costing £20-40/MWh,
and gas plants costing £80-150/MWh,
then the price paid to all generators is usually set by the most expensive generator needed to keep the lights on—often gas.
This system was created because:
it encourages investment,
it rewards efficiency,
it ensures enough generation is available.
But it also means that when gas prices soar, electricity prices soar too, even when much of the power is coming from renewables.
Why defenders say the system works
Supporters argue that consumers often focus on periods of high prices.
During periods of low demand and abundant wind:
wholesale prices can become very low,
sometimes even negative.
They argue that over time these market signals encourage investment in the cheapest technologies, which increasingly means renewables.
Why critics say it is broken
Critics such as Richard Murphy and many energy campaigners argue that consumers are not seeing enough of the benefit from low-cost renewable generation.
They point out that:
Scotland frequently generates more electricity than it consumes.
Wind power can be extremely cheap once built.
Consumers still face bills heavily influenced by global gas markets.
Some renewable generators earn very large revenues when gas prices spike.
From this perspective, the market was designed for a fossil-fuel age and no longer reflects the realities of a renewable system.
What reforms are being discussed?
Several ideas are being debated.
1. Split markets
One proposal is to separate:
low-cost renewables,
high-cost gas generation.
Renewables could receive long-term fixed prices while gas plants operate in a separate balancing market.
This would likely reduce average bills but could make investment decisions more complex.
2. More Contracts for Difference (CfDs)
The UK already uses this approach.
Generators receive a fixed strike price.
If market prices rise above that level, money flows back to consumers.
Many economists favour expanding this model because it gives price certainty without completely redesigning the market.
3. Regional pricing
A particularly controversial proposal.
Electricity prices would vary by region.
Because Scotland has abundant wind generation, Scottish wholesale prices could often be lower than those in southern England.
Supporters say this reflects reality.
Opponents fear it could create a postcode lottery for energy costs.
The Scottish paradox
Scotland illustrates the issue perfectly.
The country has:
vast wind resources,
hydro power,
growing battery storage,
substantial electricity exports.
Yet Scottish households still pay bills largely linked to the UK-wide and European market structure.
Many Scots therefore ask why people living beside wind farms do not receive dramatically lower electricity prices.
There is no technical reason they could not. The obstacle is largely political and regulatory rather than engineering.
The deeper problem
The real challenge is that electricity must be available:
when the wind blows,
when it does not,
on cold winter evenings,
during periods of high demand.
The market therefore has to pay not only for cheap renewable energy but also for:
backup generation,
storage,
transmission networks,
reserve capacity.
That means electricity can never cost only the marginal cost of wind turbines.
Looking ahead
Over the next decade, as renewables become a larger share of generation, pressure for reform is likely to grow.
The fundamental question is:
Should electricity be treated primarily as a market commodity priced globally, or as an essential public utility where consumers directly benefit from local low-cost renewable resources?
The UK's current system leans towards the first model. Much of the debate in Scotland, and increasingly across Europe, is about whether the balance should shift towards the second.
If it does, households in renewable-rich regions such as Scotland could eventually see noticeably lower electricity prices than they do today. The key question is whether governments are willing to redesign markets that have been built around gas and fossil-fuel generation for several decades.