Why we need immediate action to take control of our energy security
The horrific events in Ukraine and their impact on energy prices underline the UK’s need to kick its gas addiction and strengthen its energy self-sufficiency.
The world is facing the biggest energy crisis for 50 years.
Gas prices – already spiralling since last summer – have gone through the roof following the invasion of Ukraine by Russia.
Britain uses little Russian gas, but the global price spike brings into alarming focus the costs of our addiction to fossil fuels.
The standard price cap on household bills jumps 50% next month. In October it will rise again, with the Office for Budget for Responsibility suggesting energy prices could reach £2,801 this year. That would be nearly three times what it was a year ago. It is one part of the broad affordability crisis afflicting Britain.
Soaring global gas prices are behind the energy bill increases. Britain is highly dependent on fossil fuels - 85% of UK houses rely on gas boilers for heat, gas fuels a large proportion of our electricity generation and despite growing interest in electric vehicles, almost all the cars and trucks on our roads are petrol powered.
EDF fully supports the Government’s strategy towards energy security, supported by more nuclear and renewables which over time will wean us off high carbon gas in favour of low carbon electricity. Twinned with EVs and heat pumps, it can drive fossil fuels out of other parts of our lives.
But we must also act in the short-term because households are suffering now.
Support for the most vulnerable
Already the number of customers calling us worried about debt has increased.
In February, the Government rightly announced support to mitigate against next week’s increase.
But since then the situation has dramatically deteriorated. This was acknowledged by the Chancellor in last week’s Spring Statement and his promise to keep the situation under review is welcome.
If a near £3,000 cap does become reality, households will need more help, especially the poorest. A year ago, the 10% lowest-earning households in the UK spent £1 in every £12 of their budget on energy. This will increase to £1 in every £8 from April and could rise to £1 in every £6 from October
We understand Government funds are scarce and that the broad affordability crisis is not limited to energy. That is why any further Government support on energy bills should be targeted to those most in need.
For Britain’s most vulnerable families that could make the difference between heating and eating.
If bills continue to rise, further targeted support is something Government could look to implement well before the October price cap increase: Customers would welcome early reassurance of support.
A big push on energy efficiency
Targeting bill rebates at the most in need makes best use of scarce resources. But of course, it is not just the poorest 10% who will suffer if bills approach £3,000.
The biggest opportunity to cut household bills permanently is a dramatic increase in energy efficiency. The value of insulation increases significantly as bills rise. When bills were at £1,200 per year, loft insulation saved £165 a year. Against next month’s £2,000 cap, savings are £250 a year and on a £3,000 bill, loft insulation would save £340 every year.
Acting now literally insulates Britain against rising prices.
During the coming six months, before people start turning heating back on in the autumn, Britain should mobilise a national effort to get homes ‘Winter Ready’ by driving uptake of insulation and smart meters - measures which help people reduce and control how much energy they use.
The Energy Company Obligation (ECO) has provided 2.2 million of the UK’s poorest households with energy efficiency measures which will save £15bn over their lifetimes.
It is a good programme which should continue – and be extended to many more households. But it is funded by all the other energy customers in Britain as part of the levies on bills. Adding more costs to bills is not an option.
An investment from Government to expand the ECO scheme and offer it to more households would cut bills permanently for millions of homes. It would be good for the planet and good for the pocket, as well as creating jobs and boosting the economy.
We also need to accelerate the roll out of smart meters. They help customers take control of how much energy they use, particularly when used alongside apps like EDF’s Energy Hub which links customers to smart meter data to show which appliances are using the most energy. Accelerating the roll out, particularly for rented households and vulnerable customers, could make a big difference.
Protecting consumers from unfair competition
Alongside this, Ofgem and Government are rightly working to ensure the market works in customers’ interests for the long term and drives the transition to net zero.
We welcome Ofgem’s beefed-up scrutiny of market participants because that can help stop further failure impacting negatively on bills. We want to see Ofgem take action quickly where there is cause for concern. We also welcome plans to reform the price cap: A price cap which protects customers today but harms them tomorrow because it contributes to supplier failure is not really in customers’ best interests.
Getting off the hook of our gas addiction will take time. But as any addict knows, quitting is all about the first step. There is plenty Britain can do right now to get on track for a cleaner, healthier future.
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