Energy Crisis Commission calls for Government to tackle high electricity prices and boost insulation in upcoming Budget

"The Government should be commended for its ambitions to improve societal outcomes by transitioning to clean energy, and we have seen great progress and real commitment across the power sector.  This includes setting up Great British Energy, unblocking onshore wind, consenting projects that will power 7.5 million [4] homes, and reforming the planning process. These actions will help to secure billions of pounds of private investment in our energy system, which is vital for long-term resilience.

"We also should be proud that the collaborative efforts of Government and industry mean clean technologies like heat pumps, solar and batteries are being installed at record levels. However, the Warm Homes Plan has still not been announced: it must be focused on making it easy for all homes to make the upgrades and changes they need, ensuring that low-income and vulnerable households are protected and prioritized. 

"Without meaningful action on bills, both for households and businesses, the switch to electrification will stall. The Government is taking steps to boost our clean power capacity and insulate billpayers from volatile international prices again, with renewables already lowering the wholesale electricity price by around a quarter. But bills are high today, and people are unlikely to move to more efficient electric heating if it is more expensive.

"The upcoming budget should include details on how the Government will reduce the ‘spark gap’ between electricity and gas, for example changing how fixed energy system charges are paid for, including shifting policy costs from bills to ensure schemes are funded in a more progressive way. The Warm Homes Plan should recognise it is essential that important energy efficiency schemes such as the Energy Company Obligation are retained. 

"The urgency of this crisis has not abated; bills are still too high while geopolitical tensions and conflicts persist, and the impacts of climate change, such as flooding on food production, are increasingly harming the UK. We need a structural shift towards electrification and away from dependence on gas for power and heat. 

"The fiscal environment is challenging, but it’s important to consider overall costs, both now and in the future. Without concentrated efforts now, the UK remains critically exposed to further energy market volatility and price spikes, which in turn could cost households, businesses and taxpayers billions of pounds more in the long-term.”

The ECC extends its deepest gratitude to its outgoing chair, the Rt Hon David Laws for his commitment. Commenting on the ECC update, the Commissioners said:

Louise Hellem, Chief Economist, Confederation of British Industry (CBI), “The UK’s energy crisis remains a spectre on the cost of doing business, with highly volatile energy prices a continued drag on business investment. Accelerating the energy transition is vital to both national energy security and mitigating the impacts of climate change. It is a defining strategic economic opportunity for the UK and should be the backbone of a competitive, resilient economy in an uncertain world.
 
This won’t happen unless high electricity prices are addressed. The government must confirm targeted industry support for fuel-switching in its upcoming budget alongside a serious review how policy costs, which deliver vital energy infrastructure, are paid for to maintain the UK as an attractive place for decarbonisation investment.”

Gillian Cooper, Director of Energy, Citizens Advice, “With energy bills still far higher than before the crisis and millions in energy debt, Citizens Advice is bracing for another tough winter helping people heat their homes and keep the lights on.

“The government’s expanded support this winter is welcome, but it’s not enough. It must cut electricity costs so people see the benefits of clean, renewable power. Shifting some policy costs into general taxation or spreading them more evenly between gas and electricity would save households hundreds of pounds.

“And for those struggling most, the government should strengthen targeted help like the Warm Home Discount and make it easier and cheaper to fix cold, draughty homes.”

Dhara Vyas, Chief Executive, Energy UK, “Bills remain much higher than they were in 2021 and household customer debt is at a record level - the after-effects of the crisis are still very much with us. The Government is making the right moves for the long-term and customers in the future will reap the rewards of a clean power system, stable bills and energy independence. Right now though, the Government also needs to take action and help those who have been facing persistently high bills for several years. Reducing electricity costs would both ease that burden and remove a serious barrier to the adoption of clean heat technologies. This has to be accompanied by properly targeted support for customers in need and in addition, the Government must make sure the forthcoming Budget and Warm Homes Plan support, rather than undermine, lasting bill reductions.”

Adam Scorer, Chief Executive, National Energy Action (NEA), “For millions, the energy crisis was not a single, market event. It was a worsening of a terrible norm and confirmation that a warm home would remain a vain hope.  Those households still face the daily reality of cold, damp homes and impossible choices. The energy crisis should commit us to the necessary actions that will make an affordable, warm and health home a reality for all, regardless of income and personal circumstance.”

Jim Watson, Professor of Energy Policy, Institute for Sustainable Resources, UCL, “Whilst the worst effects of the energy price shock are now behind us, household bills are still too high. The UK still has some of the highest electricity prices in Europe. Whilst the government is doing a lot to make our energy system more resilient over the medium term, more immediate action is also needed. More could be done to reduce the price of electricity, for example by moving policy costs to general taxation and by reforming the electricity market. There is also an urgent need for a comprehensive and practical plan to improve the energy efficiency of homes. This plan needs to learn lessons from recent policy failures and the much more successful policies that have been implemented in other European countries.” 

The ECC’s one-year review [5] found that major progress has been made in the last year on renewables, such as the Contracts for Difference scheme, reforms to grid connections and ongoing changes to planning processes, but further details are yet to be set out on exactly what this means.

Ofgem has introduced new financial checks to prevent supplier failure, new standards to improve smart meter performance and a new consumer outcomes framework, while the start of a plan to tackle record high levels of debt has been announced in recent weeks. 

In addition, the roll out of net zero technology is gathering pace, with record levels of heat pumps, solar and batteries installed. Government schemes like the Boiler Upgrade Scheme have also grown since the ECC’s first report, and the Clean Heat Market Mechanism was introduced (though weakened by reduced fines for non-compliance).

However, the ECC is clear that more progress is required to build the UK’s resistance to a future energy crisis. Electrification is being held back by high electricity costs, and plans for rebalancing policy costs should be brought forwards to encourage investment and lower bills. Details of the Warm Homes Plan are essential for ensuring consumer and supply chain confidence and investment in heat pumps and energy efficiency, so the future of minimum standards and grant and loan schemes should urgently be made clear. 

Meanwhile, crisis-era financial support has largely ended and despite welcome action to expand access to the Warm Home Discount, more progress is needed to ensure the most vulnerable households are protected from high energy costs.

Businesses are also still grappling with high energy costs. While the new British Industrial Competitiveness Scheme will help around 7,000 energy-intensive businesses with electricity costs from 2027, primarily through lower network charges, it does not tackle high wholesale prices and is funded by ineligible businesses and households, which continue to struggle.