Little known fact on energy price spike

7th Feb 2022

 

All of us are concerned about what is happening to energy prices in the UK. Those of us that work in the sector, more than most, understand the root causes and the impact it has on consumers. Indeed our sector, whether it is delivering the Fuel Poor Network Extension Scheme; ECO boilers; grants to fuel poverty campaigning organisations, has a great track record in actually delivering for consumers.

However, there is now anecdotal evidence that consumers, upon hearing that wholesale gas costs are the problem, are becoming wary of seeing gas boilers as a means of addressing fuel poverty. All perfectly understandable, despite it being a mistake.

We know that increased wholesale gas prices also has an impact upon electricity bills, even if the consumer doesn’t hear that in the media coverage. They just hear gas price increases. And yes, gas prices to domestic consumers have increased by more than electric in the past 12 months, but before consumers rip out their gas boilers, here’s a little known fact.

Using the newly announced Price Cap rates for gas and electricity, a heat pump will cost the consumer £270 a year more to heat their home than a gas boiler (based on Ofgem’s figures). You read that right, despite all that has happened in the past 12 months, a heat pump will cost more to run than a gas boiler.

Clearly, there are instances where a heat pump is better value – replacing outdated electric storage heaters for example. But replacing mains gas boilers is not an economically rational thing to do.

When consumers have seen the Price Cap increase by nearly £700 a year, I fail to see how it helps the fuel poor to suggest ripping out their gas boiler for a heat pump, to put up their bill by another £270. Frankly, only those for whom money isn’t a worry would suggest it.

These are worrying times for consumers. They need help and support to make the right decisions for their families, not an extra bill to pay.

Best wishes

Mike Foster, CEO

Mike Foster

EUA's Chief Executive

 

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