Britain must kick its addiction to gas to protect consumers and the environment
EDF say gas is an obstacle on the pathway to net zero | Credit: EDF
EDF’s Managing Director for Customers, Philippe Commaret, explains why global gas price increases are causing our energy bills to increase and why we must take action to kick our addiction to the fossil fuel
When Ofgem announced its new energy price cap earlier this month, it explained the increase was driven by a rise of over 50% in energy costs over the last six months with gas prices hitting a record high.
Britain and its households are particularly exposed to global gas prices because we burn a lot of gas in our boilers to heat our homes and because electricity from the country’s gas-fired power stations sets the price of electricity.
This year gas supplies are down because of Russia limiting exports to Europe and cold weather in February and April depleting reserves. Gas demand is up as economic activity recovers from lockdown. That has driven global prices to unprecedented levels.
Regrettably, customers of all energy suppliers, whether on standard variable tariffs or renewing fixed price deals, will at some point see the impact of this global trend. The headlines were about the price cap, but the price of the average cheapest fixed deals in the whole market increased by more than 20% in the year to June 2021, and have risen further since.
Customers need support now. EDF was one of the first companies to sign up to Energy UK’s Vulnerability Commitment. We are channelling financial assistance to those most in need through a £1.9m support fund, helping customers reduce their bills and manage debt. We encourage all customers to check they are on the right deal for them.
It’s a mistake to think energy suppliers like EDF are insulated from this. The price cap ensures only genuine costs are passed through to customers and the allowance for profit is a small, fixed percentage. In fact all but one of the suppliers required to complete Ofgem’s segmental reporting last year made a loss. Even since the announcement of August 6 we have seen the regulator forced to step in to protect the customers of another energy supplier at risk of going out of business because of increasing costs.
Nonetheless, we welcome BEIS’s intention to extend the price cap beyond its current end date because it works to protect customers. When costs fell last year, our standard tariff prices fell by around £100, and we’ll cut prices again as soon as we’re able.
When global gas prices surge the people who benefit are overseas gas producers. Britain is addicted to gas and our addiction is syphoning money out of the country.
What’s more, gas produces significant carbon emissions and prevents us from reaching net zero and addressing the UN’s warning that we are at code red for the climate.
In recent times, and for a few years to come, gas will be essential for heating homes and providing good jobs – but medium term it’s a drug. We need to wean ourselves off it, and we need to start right now.
Britain needs to achieve net zero in a way that keeps the cost to consumers to a minimum.
Britain and its households can take back control, and energy companies like EDF have a duty to help them.
For households, in the medium term that means switching to electric heating. The cost of this will fall over time, and switching policy costs from electricity bills to gas will help make the figures stack up for households. But even so there will need to be significant financial support for customers to pay the upfront costs that will enable lower heating bills.
In the short-term insulation and energy efficiency can make a big difference. By reducing the amount of gas burned, they cut bills and carbon. Insulation can save households £350 a year, and even a small investment in draft excluders makes a difference and pays back quickly. EDF is leading the way on the Energy Company Obligation, which has improved energy efficiency among fuel poor households. In the last year alone we installed more than 50,000 measures.
But Britain needs many more homes to be insulated to cut bills and be heat pump ready. The Climate Change Committee says meeting the Government target for all homes to be at least Band C energy efficient by 2035 means up-grading 19m homes – that’s two thirds of homes still to be treated, with the rental sector particularly in need of attention. We believe ECO should be expanded and support and incentives need to be available for more customers to insulate their homes and cut gas use and bills.
At a national level too, Britain needs to wean itself off its gas dependency. It can do that by moving electricity generation away from gas and to a mix comprising wind, nuclear and solar, supported by flexibility and storage. Day ahead electricity prices have spiralled to £125/MWh this summer on the back of gas’s surge, and have stayed above £80/MWh continuously since mid-June. Zero carbon electricity sources insulate Britain from volatile gas prices and ensure we have sovereignty over our energy supplies, and the lowest cost mix includes renewables and nuclear.
Of course, most households also use fossil fuels to power cars, and prices of petrol and diesel have risen sharply for the same global reasons. Switching to an electric vehicle could reduce the cost for fuel to drive a car by £800 a year.
Cutting gas use won’t just be good for the pocket, it will be good for the planet too. Britain needs to achieve net zero in a way that keeps the cost to consumers to a minimum. Kicking our gas addiction would be a good start.
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