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Europe's energy crisis has deepened this week, with a surge in gas prices and a slide in the value of the euro. What will puzzle many worried consumers is why a soaring gas price is necessarily reflected in the price of electricity - even when that electricity was produced by cheaper, renewable sources such as sunlight and wind.聽聽聽

Michael Grubb, professor of Energy and Climate Change at University College London, explains why the current electricity market tends to benefit energy producers rather than consumers. He says, "the way we designed the market was through competitive bidding", which allows companies "to bid in what price they need to generate, the price rises to the highest demand... and everyone gets that amount".

Part of the problem is that gas is still burned to generate electricity, so the more expensive the gas, the more expensive the electricity but that is not the core problem. Prof Grubb says "the whole market is lifted by the impact of the cost of gas".

Governments across Europe will either have to throw tens of billions of tax payers money to subsidise things or "decouple" the gas and electricity markets and force renewable energy producers to sell through a "separate market channel". This would enable consumers to access renewable energy at cost, without it going through wholesale prices.

(Photo: Flames come out of a domestic gas ring. Credit: Lee Smith/Reuters)

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