With many of us worried about increasing energy prices, especially for the upcoming winter season, and the overall cost of living crisis, it’s not unusual to be wondering how much disposable income you’ll be left with – if any – at the end of the month.
In particular the cost of energy has been of great concern for Brits this year and sadly it does not look like the situation will improve any time soon. Many sources are predicting that the new energy price cap increase, due to come into effect in October 2022, will push energy costs up even further, potentially by up to 65%. However, in the short to medium term energy prices could return to normal levels but as the effects of global warming become more prevalent, greater extremes in temperatures may cause abnormal surges in energy demand to become more common. The prospect of continued volatility will not ease consumers’ anxieties.
How much are you spending on your energy bills?
Firstly, the cost of energy varies by region for various reasons including supply availability, demand for energy, how much local distributors charge and the availability of renewable energy or fossil fuels. The average UK energy bill is just under £2,000 per year, this varies by region so some areas will fall above the average while others will fall below.
Research shows that residents of the South West are currently spending the highest percentage of their take-home salary on energy bills, typically accounting for 10.5% of the average salary in that region. For comparison, it was estimated that before the energy price cap rises, Brits were spending around 6% of their salary on energy bills, this means that by October it is possible that this proportion may have more than doubled year-on-year.
While Ofgem is still yet to make their announcement for the next energy price cap rise, experts are already making their predictions of an increase potentially up to 65% – this could take the average gas and electricity bill in the UK up to £3,300 per household by October, although this depends on usage, location, and payment method, it isn’t a statistic to turn your nose up at.
The price cap is now evaluated by Ofgem every 3 months rather than every 6 months, this means that another price cap rise could be expected in January which could drive up the average UK household energy bill to £3,615. The average bill in October 2021 was £1,400.
Should you turn your heating down?
Households across the UK may be hoping that reducing consumption will have a significant impact on their total bill at the end of the year. While this may certainly help to soften the blow, studies show that even when consumption levels are kept low, the current high energy prices mean most Brits are likely to be spending at least 7% of their take home pay on energy bills. In areas with the highest salary to energy bill expenditure, this figure is likely to be around 8% – even for those not using as much gas and electricity.
Could hydrogen help?
Although not ideal in all cases, Heat Pumps will still play a big role in the next decade. The department for Business, Energy, & Industry Strategy (BEIS) forecasts 1 – 1.7 million new installs over the next decade and the domestic manufacturing market for Air Source Heat Pumps is projected to be valued at £3 – £5 billion by 2035. This is by no means an ultimate solution, fortunately there is another solution which is gaining traction – Hydrogen.
The idea for Hydrogen is not new and in-fact is highly favoured in regard to its green credentials. It does not emit any greenhouse gases when burned with oxygen, the only product being water. However, the main barrier to hydrogen energy is the lack of natural reserves meaning that it must be produced either by electrolysis (expensive but sustainable) or steam-methane reduction (cheap but unsustainable). There is also a lack of storage and transportation infrastructure at present, however the UK Government seems intent on investing into the growth of the Hydrogen industry announcing plans to create 9,000 new jobs and £4 billion in investment this decade to create a new Hydrogen economy.
In the context of home heating, the idea is to begin injecting our existing natural gas supply with Hydrogen in low doses and increase the dosage in the coming decades, with the aim to wean off natural gas entirely. Converting the entire gas network to hydrogen presents many challenges but a recent trail from Keele University and Cadent of 130 homes showed that 20% dosing of hydrogen has had no effect on existing gas appliances in the short term. If production of Hydrogen can be done right and reliably maintained this will lead to more stability – domestically produced Hydrogen has the potential to reduce the UK’s dependency on imports and could mitigate against another winter price spike.
What can be done to soften the blow of rising energy costs?
The Government is offering some help to UK bill payers in light of the rising costs. From April 2022 the Government offered a £150 Council Tax rebate to help with rising costs, accessible to those in Council Tax bands A to D.
Additionally, for those born on or before 26th September 1955, the Government is also offering a Winter Fuel Payment of between £250 and £600. Eligible residents can apply for this from August 2022.
Ofgem offers advice on actions you could take if you’re struggling to pay, to be taken up directly with your energy supplier. Depending on your circumstances, you could be eligible for extra help such as debt repayment plans, payment breaks or emergency credits.
If you are in a fortunate enough position to consider and explore more ways to make your home more energy efficient and ultimately save money, you may also want to consider ditching fossil fuels for good. Although gas is a cheap energy source per unit, there are other options that can work out less expensive in the long run and can reduce your home’s carbon footprint.
Electricity is more expensive per unit, however electric heating is 100% efficient at the point of use which means that every watt of electricity you use is converted into heat, and nothing goes to waste.
As an efficient and effective heating solution already used in many British homes, electric radiators are a great alternative to gas heating. They supply heat through a combination of convection and radiation and can also be paired with a green energy tariff for completely carbon neutral heating. Read more on why we think you should choose to switch to electric heating for your home.