The average UK household will pay £3,549 per year for their energy bills from October after an update to the price cap from the energy regulator, Ofgem. An increase that will have a negative impact on businesses net-zero goals.
The price cap, which is updated twice a year, puts a maximum ‘per unit’ price on energy and looks to avoid a ‘loyalty premium’, whereby customers who do not switch to better deals could end up paying far more than others.
The latest update represents an 80% rise and means UK households will be paying almost treble for their energy bills compared with last October, where the cap was raised to £1,277. In February, the cap rose by £693.
The huge increase in wholesale gas costs, brought upon by Russia’s invasion of Ukraine earlier this year, have led to the current energy crisis, with Ofgem warning the situation is likely to only get worse into 2023.
“We know the massive impact this price cap increase will have on households across Britain and the difficult decisions consumers will now have to make,” said Jonathan Brearley, CEO of Ofgem in a statement.
“The price of energy has reached record levels driven by an aggressive economic act by the Russian state,” Brearley added. “They have slowly and deliberately turned off the gas supplies to Europe causing harm to our households, businesses and wider economy. Ofgem has no choice but to reflect these cost increases in the price cap.”
Chancellor Nadhim Zahawi suggested that people cut back on their energy usage, but insisted the government would provide help. Zahawi admitted the soaring price cap would cause ‘stress and anxiety for many people’.
Analysis shared with BBC News has found that Russia is burning off an estimated $10 million (£8.4m) of natural gas each day at a plant near the border with Finland. The gas, which would previously have been exported to Germany, is being burned off because Russia ‘couldn’t sell it elsewhere’, according to Germany’s ambassador to the UK.
The impact on alternative energy methods
The short-term push to simply help households stay afloat could have bad implications on investment in energy efficiency or net-zero measures, according to the Confederation of British Industry (CBI).
In a study published earlier this week before the price cap rise, 30% of businesses polled said that energy prices would likely negatively impact their current or planned investment in net-zero measures. More than two thirds (69%) of respondents said they expected their energy costs to increase in the coming three months.
Elsewhere, plans are afoot for funding of the Sizewell C nuclear power plant in Suffolk, which is expected to cost around £20bn. As reported earlier this week, the UK government is expected to confirm it will invest in the project imminently, although not all sources agree.
The new plant is expected to operate for 60 years and generate around 7% of the UK’s electricity needs. This would equate to around six million homes at 3.2 gigawatts of electricity. Anti-nuclear campaigners, however, have said they will continue to oppose the project on grounds that it will have a negative impact on wildlife, among other things.
The government announced earlier this month that it had awarded £37m to ‘innovative biomass projects’ as part of a drive to scale up domestic renewable energy.
12 projects will receive £32m between them, including projects to increase the harvesting capacity for willow and helping farm seaweed off the North Yorkshire cost, while £5m is being invested to develop technologies which produce hydrogen.
Biomass is Britain’s second-biggest source of renewable energy, equating to 12.6% of total UK electricity in 2020, and is seen by the Climate Change Committee as being ‘essential’ for reaching net-zero. Energy minister Greg Hands said accelerating biomass was a ‘key part of ending our dependency on expensive and volatile fossil fuels.’
