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Despite a slight reduction in the UK energy price cap, millions of households are still grappling with high energy costs, partly due to sluggish progress in installing green home upgrades, reports the Energy and Climate Intelligence Unit (ECIU).
The think tank's stark analysis highlights that the slow pace of insulating Britain's homes could cost billpayers £3.2 billion annually after the new price cap takes effect. This underscores the urgent need for increased investment in green home retrofitting to enhance energy security and meet climate goals.
Ofgem recently confirmed a seven percent reduction in the energy price cap for the third quarter, lowering the average household's annual energy bill to £1,568, a decrease of £122. Despite this, the ECIU estimates that upgrading a typical D-rated home to a C-rated Energy Performance Certificate (EPC) would save over £200 annually under the new price cap. For the 4.4 million homes with even lower EPC ratings, upgrading to a C-rating could save nearly £400 for EPC E homes and £550 for EPC F homes.
The percentage of homes in England with a C-rating on their EPCs has increased from 12 percent in 2010 to nearly 48 percent in 2021, with even higher rates in Northern Ireland and Scotland but lower rates in Wales. The government aims for all fuel-poor homes to reach at least C-level by 2030 and as many homes as possible to achieve a C-rating by 2035.
However, the UK still has some of Europe's least efficient housing stock. Official figures show that the rate of installing insulation and other energy efficiency measures plummeted after 2010, with progress remaining slow despite the surge in energy bills over the past two years.
The ECIU estimates that if the rate of home insulation installations had not declined over the past decade, an additional 11 million UK households could have benefited from energy efficiency improvements by now.
"Millions of British billpayers are still counting the cost of inaction and low investment in insulating homes over the past decade," said Dr. Simon Cran-McGreehin, head of analysis at ECIU. "Renters are in a particularly difficult situation given they don't have any control over improving the warmth of their homes. Bills may have dropped slightly, but they are due to rise again ahead of winter when having a properly insulated home is the difference between affordable and astronomical energy bills."
The government has implemented several measures over the past year to promote the installation of green home retrofit measures and low-carbon heating solutions, including the British Insulation Scheme and the Boiler Upgrade Scheme for heat pump grants.
According to government figures released last week, 9,480 energy efficiency measures have been installed in 7,720 households during the first year of the £1 billion Great British Insulation Scheme. This scheme aims to assist around 300,000 households with the cost of new home insulation between March 2023 and March 2026. The most common measure delivered to date has been cavity wall insulation, accounting for 53 percent of measures, followed by heating controls and loft insulation, which accounted for 19 and 18 percent of the total.
New regulations for the Boiler Upgrade Scheme, which came into effect earlier this month, mean that grant applicants no longer need to install cavity wall or loft insulation to access funding.
Meanwhile, the Labour Party has pledged to help insulate 19 million homes within a decade if it wins the upcoming General Election.
Last year, however, the government postponed the implementation of stricter requirements for private landlords to upgrade their properties. The ECIU noted that these rules would have driven green upgrades that could have collectively saved households £1.4 billion a year under the new price cap.
Additionally, a previous study by the ECIU found that the UK spent £100 billion on wholesale gas in the first two-and-a-half years of the energy crisis—an additional £75 billion compared to pre-crisis levels—partly due to the UK's notoriously draughty housing stock.
"The UK has been particularly badly hit by the crisis because we're so dependent on gas for electricity and home heating," Cran-McGreehin added. "Shifting to net zero means building more British renewables and insulating more homes and so becoming less dependent on foreign gas imports."
The analysis follows estimates from influential energy consultancy Cornwall Insight, which recently cautioned that the upcoming reduction in the price cap might be short-lived. Recent increases in wholesale gas prices are expected to impact energy companies later this year, with forecasts predicting the price cap could rise above current levels to £1,762 from October.
At the time of going to press, Ofgem, the Conservative Party, and Labour were all considering a request for comment.
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