Electric shock: Spike in UK energy prices push cost of running EVs above gas-powered cars

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Charging electric vehicles in the United Kingdom soon will be more expensive than filling up gasoline-powered cars thanks to soaring electricity costs an economic switcheroo that could be a harbinger of shrinking financial benefits for Americans who go green.

Britain’s energy regulator warned residents to expect their electricity bills to shoot up 80% beginning Oct. 1. That’s when the national price cap on residential electricity rises, sending the average bill from about $190 per month to an estimated $343 per month, or more than $4,000 per year, according to regulators.

The shocking price hike stems from Britain’s limited reserves and Russia’s cutoff of one of the region’s major sources of electricity generation: natural gas. The UK’s energy prices eclipsed many of its European neighbors because Britain lacks domestic energy storage and production of natural gas, nuclear and renewables, making it even more reliable on imports than its neighbors on the continent.

Kenny Stein, policy director of the Institute for Energy Research, warned that the financial hardships in Europe from rising energy prices are an omen of what’s to come if America’s transition from fossil fuels to renewables occurs faster than the supply can handle.

“For the US, this actually gets to an underlying fallacy of a lot of people that are pushing electric vehicles: They assert electric vehicles are cheaper because they assume electricity prices are going to stay cheap,” Mr. Stein said. “You’re combining the increased demands on electricity, that means you’ve got to build new generation.”

The soaring energy prices across the pond come amid a major pivot in the US toward electric vehicles with President Biden’s new climate spending law pumping billions of dollars into producing EVs and providing tax credits to people who buy them.

What’s more, California last week became the first state to begin phasing out the sale of new gasoline-powered vehicles. The phase-out starts in 2026 with a 2035 deadline to end sales of new gasoline-powered cars. Many other Democratic-run states are expected to follow California’s lead.

Electricity prices in the UK will nearly double from about 33 cents per kWh to 60 cents per kWh, making electric vehicles cost more before and after driving them off the lot. By comparison, the average electricity cost in the US is less than 11 cents per kWh, according to the Energy Information Administration.

With UK electricity prices and gasoline at roughly $7.40 per gallon, the owner of a $40,000 electric Kia NIRO would spend more than $100 more to travel 400 miles than the owner of a $26,000 gas-powered Kia Sportage, according to an analysis by UK roadside assistance RAC service, the country’s AAA equivalent.

A $71,000 Jaguar I-PACE would cost nearly $115 more to go those 400 miles than its gas-powered equivalent, the $52,000 Jaguar F-PACE.

London-based Electrifying.com has a slightly rosier outlook, estimating that the average electric vehicle user now saves only 27% on fuel compared with 75% a year ago. They predict that with the higher electricity prices, a driver who travels 10,000 miles per year in an electric Volkswagen ID.3 crossover will save $34 per month on fuel compared to the gas-powered VW Golf of a similar size.

The price jump will have the hardest impact on drivers who use public charging stations and pay higher energy taxes, meaning those who must travel long distances or do not have access to an at-home charger will bear more of the burden. Electricity prices at public charging stations are cruising to almost 81 cents per kWh.

Though the UK serves as a cautionary tale, Mr. Stein said the US is in a much better position to weather fluctuating electricity costs because America still enjoys more robust production of the oil and natural gas used for power generation.

California’s average electricity cost is one of the highest in the country at 18 cents per kWh, according to 2020 data from the EIA, the most recent year available. While almost 70% higher than the national average of 10.59 cents per kWh, it is about one-third of the UK’s new price.

Climbing US natural gas prices have already pushed electricity costs higher. In July, Americans’ electric bills climbed to their highest levels since 2008 and were nearly 90% higher than the same time last year.

Natural gas is trading above $9 per million British thermal units, compared to about $3.50 a year ago.

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