Ofgem recently announced that the energy price cap would increase by 54% in April, meaning the average householder will pay a staggering £693 a year more on their energy bills. This follows an energy price cap increase of £139 in October last year. 22 million people in this country will be affected, including people who might have been on a cheap deal with a small supplier that went bust and automatically moved to a default tariff with a bigger energy supplier. The impact of the energy crisis on low-income households that were already struggling to afford energy bills will be devastating.
What is the energy price cap?
The energy price cap is a limit on how much energy suppliers can charge per unit of gas and electricity, to protect you from being overcharged if you are on a default or standard variable tariff. This limit isn’t on your total bill as that depends on how many units you use. The price cap is set by Ofgem (The energy regulator for Great Britain) every 6 months and reflects how much it costs suppliers on average to get energy to consumers.
A year ago, I was working for an Energy Advice and Fuel Poverty charity, helping people from some of the poorest and most deprived areas in this country. I spoke with people on a daily basis who were struggling to afford their energy costs and having to choose between food and heating. Fuel Poverty is a national injustice whereby low income households are living in poorly insulated properties with expensive heating and getting into increasing debt. Undoubtedly, low-income households will struggle to meet the cost of the energy price cap increase in April, and millions more people will be pushed into Fuel Poverty. The worsening cost of living crisis combined with stagnated wages and the withdrawal of the £20 a week universal credit increase will be devastating for so many vulnerable people in this country.
What is Fuel Poverty?
Fuel Poverty is when a household is unable to afford to heat their home to the temperature needed to keep warm and healthy. The recommended temperature for common living areas is 18-21°c, depending on your age and health. An estimated 4.5 million people are living in fuel poverty and a further 2 million will be pushed into fuel poverty after April.
Fuel Poverty is an environmental, health and social issue
Living in a cold home presents serious health risks to vulnerable people such as the elderly, disabled and young children. Age UK has issued a stark warning that the number of fuel poor older households could reach 1.1 million by spring. Health problems such as respiratory conditions caused by the cold and damp are preventable and put pressure on the NHS, particularly in the winter. Mental health can also be severely impacted by living in a cold home. National fuel poverty charity NEA estimates that 11,400 winter deaths are caused by cold homes. We could prevent thousands of people becoming ill or dying from cold homes if we invested in insulation and renewable power.
Rising energy costs are likely to push 2 million more people into Fuel Poverty this winter
Rishi Sunak, multimillionaire MP and Chancellor of the Exchequer, revealed government support earlier this year to “ease” people’s anxiety over the energy price cap increase, consisting of a £150 council tax levy loosely aimed at low-income households and a £200 rebate (effectively a loan) on energy bills. The £150 council tax levy in April is welcome but does not go far enough for households expecting to pay £2000 a year for energy bills. The £200 rebate only comes into effect in October (7 months after the energy price cap increase) and will be paid back over 5 years from 2023. Which? Research claimed that 2.5 million people missed payments in January. The government's solution to helping people already in fuel debt or on the brink of debt is to offer a loan. Looking ahead to October, Ofgem is likely to announce another energy price cap increase, so does the government propose another loan?
We are facing a worsening cost of living crisis, caused by record high inflation, high petrol costs, rising energy bills and an untimely increase in national insurance. We need to support low income households that will inevitably struggle to cope with rising costs.
What caused the UK’s Energy Crisis?
Wholesale gas prices have reached record highs recently, driven by a huge increase in demand in the recovery from the covid-19 pandemic and a particularly cold winter in 2020/21. The surge in gas prices has led to lots of smaller energy suppliers going bust in recent months.
In more recent news, the Russian war on Ukraine is driving up gas prices to its highest recorded level (rising 66% in the week up to 6 March). Russia is the world’s largest exporter of natural gas, and even though the UK gets only 6% of its gas from Russia, there are concerns that sanctions on Russia will constrict supplies and drive up gas prices worldwide.
We need to break up with fossil fuels
Whilst so many people have been struggling with the rising energy costs, big oil companies such as Shell and BP have announced huge profits in the last year. If this makes you angry, then you’re not alone. Many campaign groups are calling for a windfall tax - a one off tax for the companies that have profited from oil produced in the North Sea - to be used to help reduce energy costs.
Last year, the Internal Energy Agency (IEA) warned that there should be no new oil or gas development in order to meet Net Zero targets by 2050. Despite this, the UK Government refuses to break up with fossil fuels and just approved a new oil field ‘Abigail’ in the North Sea. Instead of using public money to prop up the UK oil and gas industry, the UK needs to phase-out from fossil fuels and focus on a just transition to renewable energy led by the workers unions and affected communities whilst creating new green jobs and a brighter cleaner future.
Our reliance on fossil fuels and gas has put us in this situation because gas prices have gone up worldwide and if we had more of our own renewable energy then we wouldn’t be vulnerable to the price increase that has caused the energy crisis we are experiencing.
What are the solutions?
The good news is that the cost of renewables is decreasing and in 2020 a record 41% of UK’s electricity came from renewable sources. We don’t yet have the technology to store lots of electricity when it's not windy or sunny enough, so we need to accelerate a renewable energy transition. We have the technology to make homes more energy efficient but it's currently not affordable for everyone and there is a lack of installers with the required accreditation. The government and local authorities need to provide more funding, more training for installers and educate homeowners about the importance of improving energy efficiency. We need to learn the right lessons from this energy crisis and the UK can reduce household energy bills whilst cutting carbon emissions if it does these things.
The cost of not acting is catastrophic compared to the cost of acting now
The UK has some of the oldest and least energy-efficient houses in Europe. Buildings account for 19% of all UK greenhouse gas emissions. This is mainly from heating as 9 in 10 houses rely on gas boilers. Insulated houses use less energy to keep them warm, so less carbon dioxide is released into the atmosphere from burning of fossil fuels.
The UK Government has initiated many plans to improve home insulation across the country. The Green Deal was launched in 2013 to offer loans for home efficiency measures, but only achieved 0.1% of its target. The Green Homes Grant, a similar initiative to the Green Deal, was launched in 2020. Despite high levels of public interest, it only achieved 0.9% of its target. The Green Homes Grant underperformed badly due to bad planning and administration (£50m of taxpayer money paid to an American corporation) and may have led to redundancies after promising new jobs. A House of Commons Committee report stated that the Department for Business, Energy & Industrial Strategy “has persistently failed to learn lessons from previous energy efficiency schemes”.
The failure of the UK Government to create a successful grant scheme to insulate homes will hinder climate targets and has damaged trust in the government. Young people are especially vulnerable to higher energy prices as we are more likely to rent and there is no incentive for landlords to improve energy efficiency to a good enough standard. The long term solution to Fuel Poverty is clear: we need to insulate buildings in the UK to save money on energy bills, keep people healthy and reduce carbon emissions.
The zero carbon homes standard was scrapped by the Conservative government in 2015, resulting in almost 1.2 million new homes being built with low standards of energy efficiency. The burden then falls on the homeowner to pay for retrofitting to improve energy efficiency which costs a lot more than if it was done in the first place.
Protest group Insulate Britain are demanding the UK government to develop a legally binding plan to insulate all homes in Britain by 2030 to achieve its plans of a 78% emission reduction by 2035. They have gained lots of media attention for their controversial actions blocking motorways, which has resulted in many Insulate Britain activists going to jail.
Heat Pumps are a low-carbon heating system for your home. The UK government last year announced a £5,000 heat pump grant for 90,000 heat pumps. However, heat pumps won't be suitable for everyone as they require good insulation in the property to be an efficient heat source. Most households can join the scheme but will be required to pay the remaining install cost with heat pumps (including installation) costing typically between £10-12,000. A report by a committee of MPs said that the scheme was “not of the scale” needed and argued that the government's plan to ban gas boilers in new homes should be brought forward to 2023.
Community energy is a group of people coming together to generate, own, manage, or reduce consumption of energy. Communities can invest directly in renewable energy generation in their local neighbourhood. Harnessing the power of the community to generate clean energy has lots of benefits such as reducing poverty, improving lives in the local area, and reducing emissions to address climate change.
What can I do?
Email your MP to voice your concern and ask them to vote for green policies. Contrary to the views of a small number of Tory MPs [called the Net Zero Scrutiny group] that claim green policies are a burden to poor people and have caused the energy crisis, green policies are the way out of this crisis.
Join a local Climate Action group and campaign for Climate Justice. Fuel Poverty is a climate justice issue because it’s the poorest and most vulnerable people that are worst affected by climate change. Many organisations such as Stop Cambo, Paid to Pollute and Fossil Free London are fighting against the fossil fuel industry in the UK.
Support Fuel Poverty Action and their campaign #EnergyForAll. If you are struggling with your energy bills, or know someone who is, you should seek help from an energy advisor in your local area or contact NEA (the National charity for Fuel Poverty).