New analysis: Government’s energy strategy U-turn costs 22,500 homes up to £600 each

Media reports from earlier this week suggested that the Energy Company Obligation (ECO) home energy efficiency scheme could have been expanded by £200 million per year, but the measure was reportedly dropped by the Treasury following tensions with the Department for Business Energy and Industrial Strategy (BEIS).

New analysis from the Energy and Climate Intelligent Unit (ECIU) shows that this package could have allowed 22,500 households a year to benefit from insulation upgrades. ECO aimed to save each household an average of £300 a year under pre-crisis prices, so the saving would now equate to around £600 and year. [1]

Sepi Golzari-Munro, Deputy Director at ECIU said:

“Soaring gas prices are responsible for adding at least £500 to energy bills, forcing another 2.5million households into fuel poverty. Without help to insulate their homes to bring down gas bills there may be little prospect they can afford to keep their homes warm. Rumours that Chancellor Rishi Sunak blocked moves to boost the successful ECO energy efficiency scheme that’s saved low income households £1.2billion on their energy bills this year, could raise tough questions as the gas price crisis continues to bite.

“It’s all the more striking, since insulation is the public’s top priority in the current gas crisis with 84% backing it as the best way to cut our reliance on gas and cut bills. With any extra UK gas production having no effect on prices, it begs the question whether having gas that households can’t afford to use counts as ‘energy security’ to them.”

Dr Simon Cran-McGreehin, Head of Analysis at ECIU said:

“As Business Secretary Kwasi Kwarteng MP has rightly pointed out over recent weeks, renewables are vital for improving the UK’s energy security and cutting costs. The boost to offshore wind will help to bring down bills, nudging expensive gas power stations off the power grid.

“But because of the apparent success of a small number of backbench MPs turning the government against onshore wind, those same politicians may now have to explain to their constituents why they have locked in higher electricity bills. Onshore is cheap and popular with 80% of people across all political persuasions backing it, which rises to 87% if they can get a discount on their bill from nearby wind farms.”

Other recent relevant analysis:

• 37 out of the 40 most marginal parliamentary seats in England have below average home energy efficiency ratings, and so the homes are more expensive to heat.
• Energy efficiency measures installed from 2009 to 2019 have upgraded various homes, including 6million from EPC band D to band C, reducing those household’s heating bills by a total £1.2billion for 2022.
• Achieving the Government’s ambition of upgrading homes to EPC band C, from the current average of around EPC band D, would cut heat demand by 20%, UK gas demand by 7-8% and gas imports by 15% - but cuts to levies in 2013 mean than 9million homes have missed out [3]
• Energy efficiency and heat pumps could cut UK gas imports from Russia more rapidly than proposed increased UK gas production. Energy efficiency and heat pumps would also cut gas demand and cut energy bills, whereas extra UK gas production would not.
• UK renewables with early ‘Contracts for Difference’ (CfDs) have been paying back hundreds of millions of pounds from the gas-driven high wholesale power price since Q4 2021. New renewables with CfDs will be cheaper than the wholesale power price was before the gas crisis, and so will pay back even if the gas crisis recedes. [3]

ENDS