Three steps governments can take now to cut energy bills

As volatile energy prices continue to spike, driven in part by geopolitical instability and gas market shocks, governments face an urgent challenge. How can they bring down household energy bills immediately and protect citizens from fossil-flation making everything more expensive?

The good news is that short-term relief and long-term transition are not mutually exclusive. Here are three measures that countries could implement almost overnight.

1. Tax windfall profits of fossil fuel companies and use them to support households

Fossil fuel companies cashing in obscene profits during high fossil fuel prices should contribute to shielding consumers. Fossil fuel companies profit from this crisis. They should pay for the solution.

A windfall tax can capture excess profits and redistribute them directly to consumers through measures such as targeted bill support, direct cash transfers to most affected sectors, an expansion of existing free or heavily subsidised (“lifeline”) electricity tariffs to vulnerable households, and free public transportation.

Recycling windfall revenues into consumer protection helps avoid that outcome while keeping incentives for clean investment intact. The UK’s windfall tax on oil and gas producers raised around £12bn in 2024. This helped fund its Energy Price Guarantee, limiting average household bills during the crisis.

Anne Jellema, chief executive of 350.org, says:

This is about fairness and maintaining public trust. Right now, fossil fuel companies are making obscene profits while households struggle to pay their bills , and people can see that.. Taxing these windfall profits and redirecting them to support households is essential to protect people and livelihoods.

2. Decouple electricity prices from gas

Many markets, such as the UK, Germany, Italy and Netherlands still tie electricity prices to the cost of gas. This is even the case when much of the power comes from cheaper renewable sources like wind and solar. As a result, when gas prices spike, electricity bills rise unnecessarily.

In Spain, however, the reduced influence of expensive fossil gas and coal power on the electricity market, driven by surging wind and solar, has turned the country into one of the cheapest power markets in Europe.

Governments can intervene through market reforms such as contracts for difference, regulated tariffs, or temporary price-setting mechanisms to ensure consumers benefit from lower-cost renewable energy. Jellema comments:

Decoupling electricity from gas prices is one of the most effective ways to stabilize bills. It protects households from global fossil fuel shocks and reflects the true, lower cost of renewable energy.

3. Decentralised renewable energy

Governments should fast-track the just deployment of renewable energy in affected regions using emergency energy response funds, bilateral finance, and development support. Priority must go to distributed renewable energy solutions which are quick and easy to deploy.

These can include off-grid solar and mini-grids for communities and essential infrastructure such as hospitals and schools, rooftop and balcony solar for households, and clean cooking solutions for smallholders.

Emergency renewable funding must be redirected from fossil fuel emergency response budgets and existing bilateral aid, not by creating new debt instruments that will burden already-stressed countries.

Equity, accessibility, and long-term sustainability must be ensured in decentralised renewable energy deployment. This can ultimately guarantee that these systems are owned and managed by communities.

Jellema points out:

Relief today means transition tomorrow. These measures are not a substitute for a green energy transition; they are a bridge. In the longer term, the only durable solution to energy price volatility is to accelerate the transition to homegrown, renewable energy.

Investing in wind, solar, storage, and energy efficiency reduces dependence on imported fossil fuels and insulates economies from geopolitical shocks. It also addresses the root cause of the climate and biodiversity crisis.

But the transition must be managed carefully. Without immediate relief, households and businesses will struggle, and support for change may erode as calls for reopening ‘national’ fossil fuel sources increase.

Advertisement

By redistributing windfalls and cutting energy bills, and decoupling energy prices from gas, governments can ease the pressure now while building a cleaner, more stable energy system for the future.

The choice is not between affordability and sustainability. With the right strategy, we can, and must, deliver both.

Featured image via the Canary