- The report calls for new policies to accelerate take-up of low carbon heating in our homes.
- UK households install more than 1.6m new gas boilers per year, and just 30,000 heat pumps.
- Without changes to rebalance energy bills between electricity and gas, the government will not meet its heat pump target and the UK will miss its 2035 ambitions.
London, 29th April 2021: A group of energy suppliers, representing over 20m customers, have commissioned a new landmark report – Options for Energy Bill Reform – to tackle the unfairness in the energy market which penalises customers who want to invest in cleaner heating.
The group strongly supports the report’s recommendation that the Government should move appropriate policy costs off electricity bills and into Government expenditure and introduce a carbon tax that is levied over time across both electricity and gas. This approach would provide the best balance in terms of: incentivising heat decarbonisation; properly pricing carbon emissions; avoiding regressive impacts on the fuel poor or the average consumer; and limiting overall impact to The Treasury.
Far from putting a price on pollution, the current framework actively encourages the use of fossil fuels. Unless policy changes, UK households that opt for an air source heat pump will be paying £305 more a year in 2030 in energy bills than those with a gas boiler.
Decarbonising and electrifying residential heat is crucial if the UK is to achieve its Net Zero targets. However, at present, many policy costs – such as Feed-In Tariffs, Renewable Obligation Certificates and Contracts for Difference – are imposed on the electricity side of the bill, disincentivising those who want to transition to low-carbon heating solutions.
The report also shows the UK lags behind its European counterparts on decarbonised heating. These countries have also introduced, or are introducing, more balanced costs between electricity and gas :
- France has ten times as many heat pump sales per capita as the UK. It has lower renewable policy costs on electricity than the UK, and also levies an additional carbon charge across fossil fuels.
- Germany has 2.6 times as many heat pump sales per capita as the UK.
- The Netherlands has 4.7 times as many heat pump sales per capita as the UK.
Policy changes are required to better reflect the range of technologies such as heat pumps that will be paramount to decarbonising heat in our homes. UK households that are suitable for heat pumps should be better incentivised to transition. It is also important to ensure that the most vulnerable in society are protected from any changes so that we can deliver a fair and just transition. Before publication this report was discussed with eight representatives from UK consumer groups to gather their insights and understand better how policy can help overcome fuel poverty challenges. It was agreed that the next step is assessing what mitigating measures are needed to ensure households in fuel poverty are protected against any increase in bills.
Adrian Letts, CEO of Retail, OVO Energy said:
“Today, everything begins with Net Zero. It’s both an opportunity and a fundamental challenge for the energy sector.
“Like most energy suppliers, we sell gas to our customers. We know over time this needs to change. We are moving from a pure energy supplier to becoming a decarbonisation partner to support our members’ transition to low carbon heat in their homes. However we cannot do it alone.
“This report shows that the amount of additional policy costs loaded onto electricity bills, makes alternatives to cheap gas boilers such as a heat pump far more expensive. Moving the policy costs onto government expenditure and then introducing a carbon tax levied across electricity and gas would be the fairest and most effective way to decarbonise heating.”
Michael Lewis, Chief Executive of E.ON UK, said:
“Britain has a once-in-a-generation opportunity to make a positive change, reduce emissions and kickstart a new industry, but unless we get the economics right, we’ll never get the delivery right. To meet the Prime Minister’s 600,000-a-year heat pump target in just seven years means we need to start making energy bills fairer for everyone now – making sure the right choice is also the cheaper choice. Public First’s policy recommendation squares that circle and protects homeowners and Government’s finances into the bargain, so for me it’s a no brainer for the Chancellor to include these proposals in the next Budget update.”
Philippe Commaret, Managing Director of Customers at EDF, said:
“In order to successfully reduce our household heating emissions and reach our net zero targets, we must make it more affordable for customers who want to invest in low carbon heating options. This report highlights some of the steps needed to encourage customers to transition towards electric low carbon solutions and away from fossil fuels. Steps like this will be key in helping Britain to achieve net zero.”
Andrew Ward, Retail CEO of ScottishPower, said: “The UK has set world-leading ambitions to decarbonise the economy, and providing a cost-effective pathway to the mass take-up of electric heating is critical to meeting our Net Zero goals. This report joins the policy dots to show how transition to low carbon heating in millions of homes across the country can be delivered.”
Notes to Editors
 The numbers in these countries – while much higher than the UK’s – are still below the Government’s targets.
Information about the report
Please click HERE to download the report.
Public First is an independent consultancy that works to help companies and organisations develop new policy proposals, build economic models, and better understand public opinion. Public First is a member of the Market Research Society.
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About OVO Energy
OVO Energy was founded in 2009 and redesigned the energy experience to be fair, effortless, green and simple for all customers. Today OVO Energy and its Retail partners serve nearly 5 million customers, all striving to deliver more affordable clean energy for everyone. OVO is on a mission through its sustainability strategy Plan Zero to tackle the most important issue of our time; the climate crisis, by bringing our customers with us on the journey towards zero carbon living. OVO Energy has committed to being a net zero carbon business and achieve bold science-based carbon reduction targets by 2030, while helping members halve their carbon footprint at the same time.
E.ON is leading the energy transition: providing smart, sustainable and personalised solutions focused on our customers at home and in business, and across entire towns and cities. Millions of people across the UK choose us to meet their energy needs, making us one of the leading energy providers in the UK. As part of the E.ON Group, we’re also one of the foremost energy companies in the world. As a driving force in the UK’s renewable revolution for more than 25 years, we now supply all our customers’ homes with electricity backed by 100% renewable sources as standard. We believe the next opportunity for our customers, our country and our planet begins with sustainable energy supplies and continues with our wide range of energy efficiency and smart technologies, helping customers to reduce their impact on the planet by using less energy or generating and storing it themselves.
And as we approach the country’s 2050 net zero target, we’re also helping thousands of businesses across the UK take control of their energy supply, optimisation and generation all under one roof. Our experts have over 25 years’ experience delivering creative solutions to help businesses cut costs, reduce energy waste, meet sustainability goals and become less reliant on the grid.
For more information visit www.eonenergy.com
About Scottish Power
ScottishPower is the first integrated energy company in the UK to generate 100% green electricity. Our focus is on wind energy, smart grids and driving the change to a cleaner, electric future. We’re investing over £7m every working day to make this happen. We’re committed to speeding up the transition to cleaner electric transport, improving air quality and, over time, driving down bills – to deliver a better future, quicker for everyone. ScottishPower is part of the Iberdrola Group, one of the world’s largest integrated utility companies and a world leader in renewables. More details about our work can be found at www.scottishpower.com.
EDF is helping Britain achieve Net Zero by leading the transition to a cleaner, low emission electric future and tackling climate change. We are Britain’s biggest generator of zero carbon electricity, meeting around one-fifth of the country’s demand and supplying millions of customers with electricity and gas. With around 5 million accounts, EDF is one of the largest suppliers to British homes and businesses and a leading supplier of innovative energy solutions that are helping businesses become more energy independent. All of our home and small business customers get energy tariffs backed by zero carbon electricity as standard. EDF is part of EDF Group, the world’s biggest electricity generator. In the UK we employ around 13,000 people.