The drop in the Energy Price Cap is welcome news. The fall in wholesale energy prices will now begin to filter through to us, the customer, in the coming months. It means too that we, the taxpayer will no longer be subsidising energy costs, except for the poorest, through the Energy Price Guarantee.
But this is where the good news ends. Whilst wholesale energy prices have come down from their peak in the autumn of last year, they are still two or three times higher than 18 months ago, and these prices look set to be the new normal for the coming years. In effect, post-Covid demand and the war in Ukraine are now baked into the price we will all be paying for our energy over, at least, the next two or three years.
With the government subsidy now gone in reality, we will all be paying a very similar price for our energy as we have over the last winter. In other words – our energy prices are going to stay high for a long time to come.
With sustained high energy prices comes sustained fuel poverty. The NEA estimates that 6.7m households will remain in fuel poverty in July. That’s 23% of households! Up from 15%, 18 months ago. It is also worth bearing in mind that energy prices continue to push up the costs of basic goods and services – food and transport are still seeing double digit inflation – affecting the poorest disproportionately.
So, this problem is no longer a flash in the pan but a sustained problem that is going to push people further into poverty and keep inequality embedded in our society for a long time to come.
To solve a sustained problem, we need sustained solutions. First and foremost, we must reduce our energy use – particularly for those who are poorest. And that means making our homes more energy efficient. The data is clear: energy efficiency improvements are the most effective reducer of fuel poverty. A sustained, large-scale investment in domestic retrofit is needed if we are going to make Britain’s leaky homes fit (and affordable) for habitation. Current retrofit programmes are not nearly enough. We need to get back to the insulation rates of 2012 where we were installing nearly 2.5m measures a year (in 2020 we undertook a paltry 200,000). A well-insulated home can save 30% or more on average household bills; more than £600 a year on current prices. This figure is above the most recent ‘fuel poverty gap,’ meaning that addressing uninsulated homes can make the difference between falling into a spiral of poverty and debt, and just about managing.
We must also invest for the long term in renewable energy. It is both cheaper and less vulnerable to international market fluctuations. In the UK we are doing comparatively well in renewable energy generation, but we are not even close to self-sufficiency. Removing the effective moratorium on building onshore wind and solar would be a good start. The planning rules currently make it almost impossible to develop new energy generation onshore and without planning reform we will continue to fall short of our targets for UK generated power.
In addition, government must invest in our grid capacity. Alongside planning it is the single biggest drag on renewable energy installation. Any installation over 1MW is unlikely to come on-line until 2033 simply because it can’t be connected to the grid. Only with significant investment and capacity building in our national grid will we reduce this wait and open up the floodgates for game-changing renewable generation in the UK. High energy prices are here to stay. And whilst organisations like Severn Wye will continue to support the most vulnerable through the crises they face day to day, this challenge can only be faced with sustained investment in retrofitting homes and renewable energy.
