Why energy bills are going up? And what that means?

24 January 2022

Energy prices rise headlines have grabbed our attention and for a good but horrifying reasons. Households across the UK have been warned that energy bills are predicted to increase considerably over the next year. This could affect millions of people at risk of fuel poverty, having to decide between unthinkable options ‘Eat or Heat’, with a huge knock on effect on child poverty.

Forecast from Energy UK, the trade association for the energy sector, reveals that gas and electricity bills could increase by up to 50% from April 2022 onwards. There are several reasons for these unprecedented rises, which mainly resulted from a shortage of gas and energy supplies in the past year.

Why is the UK being relatively hard-hit by this situation? The UK is known as the cold ‘person’ of Europe as our homes are often cold and draughty. Many of our homes date from a period when the energy vector was based on coal. The country is also one of Europe’s biggest users of natural gas. Around 85% of homes have gas central heating, and it also generates a third of the country's electricity.

In February, Ofgem, the energy regulator will review and announce the new energy price cap, which represents the maximum amount that energy suppliers are allowed to charge a domestic customer on a standard variable tariff in England, Wales and Scotland (known as the unit rate per year).

About 15 million households saw their energy bills increase by 12% when the energy price cap was last updated in October. In just a few weeks’ time, we will find out how much our energy bills are likely to increase in the coming year, predictions being as much as 50%. According to Martin Lewis, that’s £1,925 per year for someone on typical use.

Most people and companies are waiting on a government announcement, which may or may not happen in the immediate term. Householders may still have to decide to either ‘freeze and eat’ or ‘heat’ their home.

More wind turbines and solar farms would help the UK generate more electricity from renewables and open up production of green hydrogen that can be used for heating in our homes as well as smoothing the demand and supply cycle. These measures are, however, not a solution to 2022’s energy price rises.

Switch Energy Supplier? Sign a fixed rate contract?

We have usually been advised and encouraged to compare energy suppliers to find the best value for our needs, usage and wallet. Even though, changing supplier is time consuming, it meant that customer could get a cheaper deal with a different company.

However, this is no longer the case as there is simply no better offer available on the market including fixed rate.

Should you move to a fixed rate contract, instead of waiting the new energy cap price?

Martin Lewis – one of the biggest proponents of switch energy suppliers - recently advised that most people should do nothing. He said it’s worth considering a fixed rate that’s 40% maximum more than your current price capped tariff. However, the cheapest fixed rate at the moment in the market is on average 56% more than the cap. This removes fixed rate contract out of the equation.

Here is the full explanation, detailing his assumptions in calculation the figure above.

Instead of searching for a cheaper deal, householders are being encouraged to improve the energy efficiency of their homes to reduce the cost of heating, and therefore have a slightly better control over their energy bills.

Improve energy performance of your house

So much can be done to enhance the envelope and environment within our homes now. Some of the measures that we can implement to improve the energy performance of our homes include improved thermal insulation of the roofs, external walls and ground floors, doors and windows, as well as considering the use of heat pumps instead of boilers.

Loft insulation
Insulating the roof tends to be one of the most cost-effective measures and over 98% of our homes have this measure implemented to some extent.

Wall insulation
The thermal performance of external walls can in some cases be improved by installing an insulating material combined with a protective layer, ideally with both being from sustainable sources.

Windows, doors and draught proofing
Replacing or upgrading to double or triple glazing can be very expensive, a good trick is to seal around your windows and doors for any gaps. Some permeability is actually helpful in maintaining a healthy environment within our homes, and that hermetic sealing as sometimes associated with glazing solutions may not actually be the correct holistic solution.

Floor insulation
An often-overlooked area is the ground floor of a property which can be responsible for 15% of the heat loss and contribute significantly to draughts and cold air entering the living space.

Many of our homes have suspended floors and Q-Bot has developed a robot that can install thermal insulation to the underside of floorboards. This proven technology is allowing the insulation of hard to treat area, avoiding the need to remove furniture, carpets and floorboards. More than 2,500 homes have been upgraded using this solution.

The robot is about the size of a boot box and can be fed in through a small hatch in the floor to spray a thick layer of thermal insulation on the underside of the floor. This measure can reduce heating bills by 15%, help reduce the quantity of planet harming gas being consumed and help every home to be much more comfortable to live in.

Energy Savings Trust has verified Q-Bot’s energy saving claims. It was found that insulating the floor can, at 2020’s energy prices, reduce bills by £190 in a gas-heated property and by £430 in an electrically heated home (April's Energy Price, 2022). Compared to other measures, Q-Bot is the most cost-effective solution available, after loft insulation.

Written by Peter Childs FREng, Co-Director Energy Futures Lab at Imperial College London and Chairman at Q-Bot. You can read the full article, exposing Professor Peter Childs views on the energy crisis.

Energy Saving Trust says that simple changes to our homes and habits could offset the current price rises. Find out more here.