The UK’s reliance on gas to heat homes, generate electricity and fuel heavy industry has come at a steep cost, which is expected to keep on rising.
In recent weeks the financial hit to household incomes has reignited calls for the UK to move more urgently to break its dependence on fossil fuels in favour of homegrown low-carbon energy sources.
If UK homes were better insulated, warmed by low-carbon alternatives and powered by renewables then bill payers would be better off, according to experts.
The cost of supporting the UK’s green policies is falling fast too. Green levies, including support for social schemes, renewable subsidies and energy efficiency, tumbled from £186 on the average annual energy bill under the energy regulator’s summer 2021 cap on standard energy tariffs to £173 over the winter, according to analysis by industry journal Carbon Brief. Under the next energy price cap, which is set to surge to an average of almost £2,000 a year from April, policy costs will fall to £155, according to the analysis.
So can going green help keep a lid on home energy bills as well as carbon emissions? Here are the top ways the UK can guard homes against future gas market shocks while tackling the climate crisis too.
Renewable electricity
Generating more electricity from renewable energy is a guaranteed way to avoid firing up gas power plants and protecting electricity bills from gas market shocks.
Under the government’s scheme to support renewable energy projects, windfarms and solar panels receive payments from household energy bills to top up the earnings from the energy market to an agreed level, or “strike price”. But in return they are expected to pay cash back to consumers when market prices surge above this set subsidy level.
Over this winter, renewables covered by the scheme are expected to generate enough electricity to pay back £770m, which would save an average of £27 from the annual home energy bill. The UK’s existing pipeline of renewable energy projects, which are expected to be under construction until 2023, could save households up to £3.9bn in the future, according to analysis by energy company SSE, or enough to shave £140 off the average bill.
The savings could be even higher if the growth of renewable energy sources meant the UK could significantly cut the volume of gas required by the electricity system, and reduce Britain’s exposure to the whims of the global energy markets.
Home insulation
Better insulation means cheaper energy bills and lower carbon emissions. But the government’s faltering commitment to upgrading Britain’s draughty homes – considered the least efficient in Europe – has left millions of homes exposed to unnecessarily high heating bills.
Research undertaken by the Energy and Climate Intelligence Unit has found that homes with energy efficiency band D typically use 13,200 kWh of gas a year, which costs £630 under the regulator’s current price cap, or £100 more than homes insulated to band C level, which is the level targeted by government. The saving is expected to widen from April as the energy price cap rises, reaching £170 while the costs for homes insulated to band D climb to £340.
The least energy efficient homes in the UK – in which many households are living in fuel poverty – typically pay £240 more a year to heat than band C homes. Those living in homes rated F are expected to pay £400 a year more on their heating bills from April than bill payers in a C grade home, which could be transformed into savings if energy efficiency improved.
The findings have renewed calls for the government to use public money to help make home insulation affordable, which would help cut home heating bills and move the UK towards its legally binding climate targets.
Low carbon heating
About 85% of British households rely on gas heating to stay warm. But in the future homes that are well insulated and connected to an electricity system rich with renewable energy could enjoy energy bill savings by switching to an electric heat pump.
Electricity bills are not rising as fast as gas bills because gas power plants make up about half of the UK’s generation mix while renewable and nuclear energy generation helps to cushion the rising cost of electricity. Under the regulator’s energy price cap a default electricity-only tariff is poised to climb by 42% from April while gas bills will rise by 69%.
By the end of the decade paying for power could be even cheaper because the green levies that are currently collected through electricity bills – and stand at £153 a year – may be moved to gas bills under new proposals from the regulator.
The catch? The cost of buying and installing a heat pump has fallen, but remains a hefty investment for most families particularly as a cost of living crisis looms. Heat pumps also rely on good home insulation and skilled installation to run effectively.
The government’s climate agenda would need to help households find affordable options to help accelerate the rollout of heat pumps – including good training options for new installers – if bill payers are to reap the benefit.
Smart energy systems
The energy industry has struggled for years to make the case for installing a smart meter, but soon the rollout of a new generation of energy tariffs and digitally enabled appliances could convince the doubters that it is savvy to go smart.
By opting for a so-called “time-of-use” tariff households could save money on their energy bills by running a load of laundry or the dishwasher during periods when energy is cheap, and avoiding times when energy is most expensive. Smart home appliances, electric vehicles and batteries could automatically pick the best time to charge up overnight, which would make saving money even easier.
Octopus Energy, a leader in time-of-use tariffs, has found that the average customer using its Agile tariff would save £188 a year by avoiding energy use during peak “surge pricing” periods compared with using a standard variable tariff.
But the even bigger benefits for households take place well beyond the front door. By using less electricity during peak demand hours, and making better use of renewable energy during low demand hours, the energy system could avoid investing billions in new power plants and grid connections, which are ultimately paid for through home energy bills.
A study by Imperial College London and the Carbon Trust found that the UK could save up to £8bn a year by 2030 by using a more flexible electricity system. The study found that shifting how we use electricity, using more energy storage and trading electricity with neighbouring countries via giant subsea cables could save up to £40bn by 2050 – even after taking into account the cost of these investments.