Millions of UK households in cold homes to be charged £700 inefficiency tax
Millions of homes in cold climates must pay a £700 penalty for their energy inefficiencies.
A report conducted by the ECIU has cautioned that although a decrease in the energy price cap is expected, the most inefficient homes will still be paying hundreds of pounds more annually than their eco-friendlier counterparts.
This week, Ofgem is expected to announce a slight decline in the domestic energy price cap in the UK; however, this news will not be of much assistance to the countless households that still pay hundreds of pounds more in annual bills than those residing in more energy-efficient dwellings.
Cornwall Insight, a renowned analysis agency, announced in their latest energy bill predictions that the average price difference between the last quarter of 2020 is anticipated to drop by approximately seven per cent compared to the same period the year before, amounting to around £1,925 annually.
Ofgem suggested that the cap for energy bills could go down to £1,823 due to lowering the Typical Domestic Consumption Values used to calculate the limit.
The update cautioned that prices continue to be higher than before Russia's incursion into Ukraine. The cap is expected to rise again come early next year due to the increase in wholesale gas prices caused by the LNG strikes in Australia.
Dr Craig Lowrey, principal consultant at Cornwall Insight, pointed out that even though the October energy bills decreased slightly, the energy price forecasts remain significantly higher than before the crisis. He highlighted that the price cap needs to provide more assistance to households to pay their energy bills. Lowrey also stressed the need for the government to explore other options, such as social tariffs, to guarantee affordability and stability for customers.
He cautioned that the UK is still highly susceptible to any swings in wholesale gas prices. "When we look to the upcoming year, we have witnessed how situations in other parts of the world have impacted gas prices and our estimations of the price cap," he stated. "Just as we experienced changes in our cap estimations due to market volatility last year, similar progressions could result in significant alterations in household bills by 2024.
The UK's dependence on gas imports makes it prone to global wholesale energy market changes. This situation further reinforces the need for an energy policy that can consider the realities of the worldwide energy market whilst also providing backing for domestically sourced, sustainable energy supplies that can help keep energy prices stable for all households.
The Energy and Climate Intelligence Unit (ECIU) recently released a report showing how rising energy costs most detrimentally impacted households with the least efficient energy systems.
Utilizing data from Cornwall Insight, the think tank concluded that the average family will have to pay £1,823 annually starting in October. However, those with an Energy Performance Certificate (EPC) of F will experience costs of £685 higher than those with an EPC rating of C.
The typical British residence obtains an EPC rating of D, implying that it will be priced at £261 higher for electricity and gas this winter compared to a home with an EPC ranking of C.
To meet the UK's Net Zero Strategy, the government has established a goal of having all homes with an EPC rating of C or better by 2035. However, it has been cautioned that they are far from achieving this aim due to budget reductions on energy efficiency funding and a lack of new regulations or incentives to promote investment in energy efficiency improvements.
Ralston, an energy analyst at ECIU, proclaimed that government initiatives to enhance domestic energy efficiency have difficulty in effecting savings of hundreds of pounds annually for households, as well as upgrading the UK's energy security and reducing emissions.
Millions of people are experiencing colder, more expensive heat homes this winter. Yet, the government's foremost energy efficiency scheme is not performing well," the speaker noted. "A decade ago, the ECO insulation program was functioning admirably, installing more than two million measures in British dwellings annually. The government has declared that it wishes to reduce the cost of living - by getting the ECO scheme back up and running in time for winter and insulating homes to the point they necessitate less costly gas, this objective could be achieved.
This winter, we must consider the security of supply as we are still not through the gas crisis and the prices are anticipated to be higher than before the situation in the long run. More gas won't be available in the UK soon, and even if it was, it wouldn't affect the prices since worldwide markets determine them. More renewables and better insulation of homes would be beneficial to protect the UK from unsteady gas prices.
ECIU research has discovered that energy efficiency plans, like ECO, yield savings of £1.2bn annually at present costs. Still, it will climb even more due to increased winter pricing.
As the government is being pressured to change its energy efficiency initiatives and expand financial aid for households and companies in terms of energy bills, a new report has surfaced.
Last week, Prime Minister Rishi Sunak was met with disapproval after implying that people were not completely aware of the magnitude of energy bill assistance the government had furnished.
Ministers have recently drawn criticism for signalling their intention to postpone rules that would have mandated landlords to upgrade new rented properties to have an EPC rating of C or higher from 2025. On the other hand, the government has promised to increase energy efficiency funding, but only starting from the next Parliament.