Analysis: Families in poorly insulated housing bearing brunt of gas price increases

Families that live in homes with lower energy efficiency ratings are suffering the most financially from global gas price increase

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By Kathy Grenville

info@eciu.net

Families that live in homes with lower energy efficiency ratings are suffering the most financially from global gas price increases, paying up to the equivalent of £246 more on their annual gas bills, new analysis from the Energy and Climate Intelligence Unit (ECIU) has found.

Homes that are rated with an Energy Performance Certificate (EPC) band D, the average rating for England and Wales (37% of homes), are paying the equivalent of £107 more per year for their gas at current high prices (4.1p / kWh) on average, compared to those living in a home rated band C. This is equivalent to paying a fifth (20%) more annually for gas use for heating and cooking. [1]

However, the situation would be even worse were it not for energy efficiency measures installed thus far, without which the Energy Efficiency Infrastructure Group (EEIG) predict would result in the average bill being 25-50% higher, the equivalent of up to £500. But despite the proven effectiveness of energy efficiency, Government support for the sector has tailed off in recent years, with a 95% drop in installations since 2012, leaving households struggling with unnecessarily high heating bills.

Over the last few months, fossil gas prices have soared to four times their level in the spring as a result of geopolitical events, demand ramping up as countries in Asia recover from the pandemic, and gas storage depletion during the previous winter. These volatile price spikes mean that families in bands E and F homes, of which there are 215,989 in England and Wales, are paying on average £197 and £246 more than band C homes, respectively.

Table 1. Analysis of gas bills under previous and new gas prices, with the extra payments due to current high gas prices and comparisons between EPC bands. Note: annual bills in the table include a £95 standing charge, which is average across England and Wales. Note: figures may differ due to rounding.
EPC BandPrevious average annual bill (gas 3.3p / kWh) (£)New annual bill as prices spike (gas 4.1p / kWh) (£)Extra paid due to high gas prices (£)Extra bill payments compared to band C (high gas prices) (£)
A42550580-25
B39546873-62
C44553085-
D531636106107
E603726123197
F643776133246
G550661110131

Commenting on the analysis, Dr. Simon Cran-McGreehin, Head of Analysis at the Energy and Climate Intelligence Unit (ECIU) said:

“In the midst of a gas crisis brought about by the UK’s addiction to geopolitically volatile fossil fuels, benefits of limiting energy waste have never been clearer. While we’re busy importing expensive gas, influenced by Putin, our leaky homes are allowing a significant proportion to be wasted. A series of home improvements can limit this, cancel out these price rises and help to guard against future price spikes, while making homes warmer and healthier to live in.

“The long-awaited Heat and Buildings Strategy is a vital opportunity for the Government to build on previous successful insulation schemes and learn from mistakes in others. This would help achieve the multiple wins of reducing bills, improving health, and cutting emissions – all whilst protecting the UK from the influence of Putin.”

In the UK, energy efficiency standards are lowest in Yorkshire and the Humber, where two-thirds (66%) of homes fall below the Government’s EPC band C target set for 2035. Similar statistics are found in the West Midlands (64%), and North West of England (62%), all areas crucial to the Government’s ‘levelling-up’ agenda.

Experts widely recognise that energy efficiency is a key part of decarbonising the UK’s homes, but previous analysis from the Climate Change Committee and the Environmental Audit Committee has stated that progress to date has been very slow. Both Committees have also highlighted that new homes, the easiest to make energy efficient at the building stage, often do not reach the highest standards possible. Data supports this; in 2020, only 1.6% of new builds reached EPC band A.

Footnotes:

[1] This analysis is for the gas costs of a dual fuel domestic customer paying by direct debit, and all values include VAT at 5%. It is based on “GB average” data from Ofgem’s price cap model -> sheet 1a -> table “Other Payment Method”, for the price caps commencing in April 2021 and October 2021. The analysis used: m(12,000kWh) i.e. total gas bill; Nil kWh i.e. standing charge; and average consumption of 12,000kWh per year.

Unit prices were calculated as follows: Unit rate = ( total gas bill – standing charge ) / average consumption. Gas bills for each EPC band were then calculated using the unit price, the average gas consumption of each EPC band, and the standing charge. This approach (applied to both gas and electricity) can be used to accurately reproduce the GB average bill presented in Ofgem’s model, but differs slightly from the examples given on Ofgem’s webpages announcing the price caps, e.g. for October 2021.