9 million UK households each set to pay £170 more for heating due to Governments’ failures to upgrade homes

The slashing of support for home energy efficiency measures since 2013 has undermined the current Government’s own ambitions to upgrade UK homes’ average energy efficiency from ‘band D’ to ‘band C’, with millions of households set to waste £1.5billion of energy in the financial year starting in April 2022, according to new analysis by the Energy and Climate Intelligence Unit (ECIU).

If insulation was being installed at the rate seen in 2012, an extra 250,000 homes could be upgraded from January to the end of March, cushioning each of those households to the tune of £170 when the energy price cap is raised in response to significantly increased international gas prices.

Since 2013, successive Government cuts to support for insulation have reduced uptake from 2.3 million installations in 2012 to a mere 10% of that on average from 2013 to today. Had Governments continued to support the UK’s insulation industry, an extra million homes could have received two major insulation upgrades each year (e.g. loft insulation and cavity or solid wall insulation). This forms the core part of a package of energy performance upgrades that can cut gas usage by 20% for the average home and move it from band D to reach the Government’s target of band C.

The failure to upgrade homes is particularly harmful because those with worse energy efficiency are disproportionately occupied by households on lower incomes who are least able to afford the higher costs of heating. This problem is worst in areas most in need of ‘levelling-up’, for example two-thirds of homes in Yorkshire and the Humber fall below the Government’s target for energy efficiency. Households that cannot afford to exceed their current spending would have to cut their gas use by almost 40% under April’s higher prices.

With a band D rated home costing £80 a year more to heat than a band C home from 2013/14 to 2020/21, and reaching £100 in financial year 2021/22, the average UK home has spent an extra £660 to-date compared to the band C ambition (equivalent to more than an entire annual average gas bill during that period). The previous rates of upgrades could have helped 1million homes per year and 8million by the end of 2020, and this growing number of households would have saved a running total of £3 billion on gas.

With another 1 million homes missing out on insulation in 2021, and gas bills set to rocket when Ofgem’s price cap is increased in April, 9 million households will each pay an extra £170 on average in financial year 2022/23 compared to if they had been upgraded – an extra £1.5billion from households already feeling the cost-of-living squeeze.

Ahead of his Committee’s upcoming report on decarbonising heat in homes, Darren Jones MP, Chair of the Business, Energy and Industrial Strategy Committee, said:

“Levies on energy bills have paid to insulate millions of homes over the past decade, cushioning them from the gas price spike. In other words the current situation could have been a lot worse for many home owners facing high gas bills.

“But this small mercy does not extend to the majority of Brits who are finding themselves on the sharp end of the cost of living crisis, exacerbated by successive Governments’ failures to maintain, let alone improve, support for home energy efficiency. The rate of insulating homes has crashed since 2012 through cut backs on helping households reduce energy waste. The true cost of this short-termist thinking is now coming home to roost for millions of families struggling to pay their bills – bills that are now £170 higher than they would otherwise have been. This moment must be a wake-up call for the Government to not repeat the mistakes of past and invest properly in helping people improve their homes. Gas prices are inherently volatile, so the best solution is to reduce this country’s reliance on gas.”

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

“The legacy of David Cameron’s supposed ‘cut the green crap’ mantra is a short-term political decision leading to longer-term higher bills for millions. With talk of cuts to the ECO initiative, history could be repeating itself – sticking plaster solutions that don’t help Britons address poorly insulated homes will leave them vulnerable to future gas crises, to Russia turning off the taps and forcing up the price of gas.”

“The simplest way to protect the UK, particularly less well-off households, against volatile international gas prices is to use less gas. Keeping a gas boiler chugging away has become much more expensive and may well lead many to consider making use of new government support in April to switch to heat pumps that don’t produce air pollution and that run on electricity, the price of which thanks to British renewables has not shot up in the same way as gas.”

“Calls to expand North Sea exploration must be put in context – geopolitics and global demand still affect the price of gas in the UK so further drilling wouldn’t properly insulate us.

The analysis behind these figures is presented in this briefing: https://eciu.net/analysis/briefings/heating/insulation-and-gas-prices