Resolution Foundation

How to protect Britain’s poorest from fossil fuel poverty

The longer we remain hooked on imported fossil fuels, the longer our energy bills remain subject to the whims of global commodity markets

A record jump in the energy price cap is undeniably bad news, especially coming at a time when millions of families are facing stretched finances.

Soaring gas markets – wholesale prices have nearly tripled inside a year – are directly affecting the cost of energy we use at home, at a time when a reversal of the £20 Universal Credit uplift and the impending end of furlough are reducing incomes.   

The extra £139 bill, on top of a near-£100 increase back in April, will clearly have a greater effect on lower income households.

The extra proportion of budgets consumed by higher prices will be three times greater for those at the bottom of the income distribution compared with those at the top. On current trends, unfortunately, the next revision in Spring 2022 is unlikely to bring much needed relief. So, what can be done?  

In the long term the answer is clear: end the nation’s reliance on natural gas. The longer we remain hooked on imported fossil fuels, the longer our energy bills remain subject to the whims of global commodity markets.  

The Government has already stated that our electricity system will be ‘overwhelmingly decarbonised’ in the 2030s, and now campaigners and industry are pushing this to be clarified via a plan for a zero-carbon grid by 2035, thereby locking in an end date for generating electricity from gas. 

Increased ambition on building renewables, including a long-overdue return of support for rock-bottom-priced onshore wind this winter, is a vital first step, as is ramping up the pace at which our power grid is modernised so it can easily deal with a largely renewable supply.  

The writing is also on the wall for the millions of gas-hungry boilers that heat our homes in winter. A grand plan for decarbonising buildings – much delayed but now due this autumn – will tell us when the last polluting boiler will be sold in Britain.  

This will mean that when current heating systems break, they are replaced by a cleaner alternative, most likely to be an electric heat pump, no ‘ripping out’ required. This vision won’t happen without Government intervention, especially not in way that doesn’t burden those on lower incomes with new taxes or higher prices.   

The best way of ensuring a smooth and equitable transition is, of course, is to focus on bringing down the cost of energy and of the things it powers, not to rely on endless subsidies.  

Wind and solar energy are constantly getting cheaper, now looking especially so when compared to gas power stations burning expensive fuel. The government’s target of 40GW of offshore wind by 2030 kicked the industry into action and setting similarly ambitious targets for onshore wind and solar would bring much-needed downward pressure on energy bills.  

Slashing the cost of heat pumps is also of critical importance. Inefficiencies in production and installation can be easily overcome, ideally through a Government-led assessment of where these bottlenecks are, with the goal of making them cheaper than a gas boiler within a few years.  

A much-needed replacement scheme to insulate millions of homes a year, particularly targeted at low- and middle-income families, is a clear test of the Government’s ambition on cutting emissions and bringing down bills.

All eyes are now on the Chancellor Rishi Sunak’s upcoming spending review, and on the Government’s building decarbonisation strategy for the details.  

It is widely accepted that, over time, energy costs will fall – but this does not mean there won’t be bumps along the way. The EU’s under-discussion climate plan includes a ‘social climate fund’ to help alleviate the regressive effect of potentially higher costs; UK lawmakers may look to do something similar.   

Back to this winter – there is, and will be, growing pressure on the Government to help households with energy bills. Direct payments to consumers by widening the current warm homes discount scheme, reversing the removal of the £20 Universal Credit uplift, and identifying and offering targeted support to families at risk of falling into fuel poverty should all top the to-do list.   

As the point of contact between families and the energy system, suppliers have a vital role in explaining how and where help can be sought. Failures here will lead to energy rationing, higher debt, and the misery of spending a winter in a cold home.  

Unfortunately, rising energy costs are not happening in isolation. Inflation is increasing quickly, pushing up the cost of other household essentials. Rocketing gas prices mean that higher energy bills are unavoidable in the short term, highlighting the importance of a quick response from government to ease the pain.