International wholesale gas prices, compounded by the Russian invasion of Ukraine, are resulting in a cost of living crisis for consumers and led to the Chancellor announcing an enhanced package of support for customers yesterday (see below).
In the UK, we are very dependent on gas for our heating, as it is used in approximately 85% of homes. Making our homes more energy efficient must therefore be a crucial part of our response to ensuring that households can afford to stay warm this winter and helping reduce bills permanently. The Chancellor’s statement yesterday was a missed opportunity in this respect. Transitioning to low carbon sources of heating (such as heat pumps) will also, in the longer-term, improve energy security while enabling the UK to reach Net Zero carbon emissions.
The Energy Company Obligation (ECO) scheme has a proven track record of delivering important energy efficiency improvements to vulnerable and low-income households. Over a four year period, the latest phase of the scheme - ECO4 - will deliver green home upgrades to an estimated 450,000 households, achieving up to £224.3 million in annual bill savings. However, achieving delivery at scale over this crucial summer period is being made difficult by delays to the regulation being laid in Parliament. Energy UK has written to the Minister for Business, Energy and Corporate Responsibility to express our support for this important regulation to be brought forward as soon as possible.
Provision must also be made for energy efficiency in the Government’s forthcoming Energy Security Bill, providing support to vulnerable consumers and building an ‘able to pay’ market.
As we’ve said, transitioning to low carbon heating will not only contribute to energy security but also minimize the impact of wholesale gas price rises on households in the future. On that note, the Government this week opened the Boiler Upgrade Scheme (BUS) for voucher applications, providing grants to households changing their heating system to an air - or ground - source heat pump, or biomass boiler. We voiced our support in the Government’s launch announcement.
Taken together with the market-based mechanism for low-carbon heat, which will obligate manufacturers of fossil fuel heating appliances to meet a rising target for low-carbon appliance sales, these schemes will help reduce the cost of heat pumps throughout the 2020s. Indeed, the Government have now published their response to the consultation on the market-based mechanism, and adopted many of the approaches that Energy UK supported. We are keen to see further commitments from Government on consumer protection, and on setting penalties sufficiently high so as to incentivize delivery.
Energy suppliers are leading the transition to low carbon heating by engaging their customers with information and product offers, investing in research and development, and supporting training and skills in the supply chain. With the right infrastructure, market conditions and policy drivers in place, energy suppliers have the capacity and ambition to support the UK’s energy security drive and keep costs stable for consumers.
Siobhan Kenny, Interim COO, Energy UK