New analysis: gas crisis set to add £4,400 to energy bills
Since gas crisis began until end of current Energy Price Guarantee (EPG) in April 2024, gas set to add £4,400 to average household’s energy bills.
By George Smeeton
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Since the gas crisis began until the end of the current Energy Price Guarantee (EPG) in April 2024, gas is set to add £4,400 to the average household’s energy bills, new analysis from the Energy and Climate Intelligence Unit (ECIU) shows [1].
In the Autumn Statement, the Chancellor of the Exchequer announced that the EPG will see the average household pay £3,000, up £500 from its current level, for energy bills for the year from April 2023. This is around three times the pre-crisis energy bill.
The analysis shows that the average household will pay £3,212 more because of the gas crisis, with the Government covering the remaining £1,181 under the EPG.
High wholesale gas prices are predicted to add £2,499 to gas bills between the start of the crisis and the end of April 2024, while the additional expense of running gas power stations is set to have inflated average electricity bills by around £1,895 [2].
Jess Ralston, Senior Analyst at ECIU said: “As the Chancellor said, this gas crisis is costing the country the equivalent of a second NHS. With families struggling this winter and bills set to rise next year, it seems bizarre that Jeremy Hunt decided not to even fulfil his manifesto commitment on insulating homes. Given the high cost of living, many homes may lack the cash to pay for upgrades leaving them and the country exposed to the volatile international gas market.” [3]
According to ECIU’s Winter Power Tracker, renewable electricity generation has effectively resulted in more than 27TWh of gas not needing to be burnt in power stations so far this winter. This is equivalent to the gas needed to heat more than 2.9 million homes over the winter or more than 30 LNG tankers [4].
Recent Government ‘Contracts for Difference’ auctions secured 11GW of new wind and solar at around a fifth (22%) of the current price of gas power generation including 7GW of offshore wind at record low prices of £45/MWh (in 2021 prices – cheaper than even the pre-crisis price of gas generation) [5].
As part of the Contracts for Difference scheme, renewables are due to pay back £730 million in quarter four 2022 [6]. Savings would be even larger if onshore wind and solar were deployed more fully, which polling shows the 77% of the public support in their local area [7].
Previous ECIU analysis has shown that installing insulation to meet the Government’s target of as many homes as possible reaching EPC C by 2035 would cut imports by three times more than gas from ‘already approved’ North Sea fields over the period 2030-2035 [8]. From April 2023, 8.6 million households are expected to be pushed into fuel poverty [9] however £6bn new funding for energy efficiency is not expected until 2025 [10].
ENDS
Notes to editors:
1. ECIU analysis is based on the average household paying a dual fuel bill of £3,000 for year the April 2023 to April 2024, and Cornwall Insight estimates for unit prices for each quarter (weighted using Auxilionne data) with the Government paying the difference under the EPG. Standing charges were assumed to be essentially stable. Further Government help with the cost of living given to low income households and vulnerable people is not reflected in this analysis, which looks at the average home.
2. Gas was used to generate around 40% of the UK’s electricity in 2021, but as gas sets the marginal price for all generation, electricity prices have also been driven up despite renewable electricity being cheaper than gas generation at present levels.
3. Chancellor’s Autumn Statement Speech for source of the energy bills costing the same as a second NHS and Conservative Manifesto 2019 committed to £9.2bn for energy efficiency over the course of this parliament.
4. https://eciu.net/winter-power-tracker
5. Contracts for Difference Allocation Round 4 results where offshore wind CfDs were awarded at a strike price of around £45/MWh, compared to a day-ahead wholesale price of around £260/MWh in the week of 18th November 2022. The day-ahead market may not reflect the price of gas that has been bought in advance (hedged) which may be cheaper.
7. YouGov polling for the ECIU
8. Insulation could cut gas imports by more than 3x new North Sea drilling
10. Autumn Statement documents
For more information:
George Smeeton, Head of Communications, ECIU, Tel: 07894 571 153, email: george.smeeton@eciu.net [currently in Egypt for COP27 – please use WhatsApp for urgent calls].