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Energy bills: why yours is now so expensive, and where all the ...

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The UK is a net importer, and delivery from suppliers such as Norway, Qatar and Russia is significantly more expensive due to a global demand ... Menu Close Home Edition Africa Australia Canada Canada(français) España France Global Indonesia NewZealand UnitedKingdom UnitedStates Edition: Availableeditions Global Getnewsletter Becomeanauthor Signupasareader Signin ShaunDaley/Alamy SaraWalker,NewcastleUniversity Author SaraWalker ProfessorofEnergy,NewcastleUniversity Disclosurestatement SaraWalkerreceivesfundingfromEngineeringandPhysicalSciencesResearchCouncilforherresearch. Partners NewcastleUniversityprovidesfundingasamemberofTheConversationUK. Viewallpartners Email Twitter Facebook LinkedIn WhatsApp Messenger EnergypricesintheUKhavesoaredthankstoabigriseinthepricecapfordomesticcustomerssetbyregulatorOfgem.ThisfollowsasmallerincreaseinthepricecapinOctober2021. TheNGONationalEnergyActionestimatesthat16%ofUKhomeswerealreadyinfuelpoverty,andwiththepricecaprisethiswilljumptoawhopping24%–almostaquarterofallhouseholdsunabletoadequatelyheattheirhomes.That’s6.5millionhouseholds,staggeringforadevelopedcountry. Thereasonfortheriseisquitesimple:gasisalmostfourtimesmoreexpensivethanthistimelastyear.TheUKisanetimporter,anddeliveryfromsupplierssuchasNorway,QatarandRussiaissignificantlymoreexpensiveduetoaglobaldemandincreaseoverthepastyear.ThegasmarketisfurtherimpactedbyEuropeaneffortstomoveawayfromRussiansuppliesfollowingtheinvasionofUkraine.Theseissuesaffectthepriceofnaturalgasusedforbothheatingandelectricity,sincenaturalgasisalsousedtogenerateaboutathirdofBritain’selectricity. Whatcontributestothecostofenergy? Thepriceofenergyismadeupofseveraldifferentthings.Thebiggestchunkisthewholesalecostofelectricityandgaswhichyoursupplierwillbuythroughmarketsfromthecompanieswhoownthepowerplants,orfromgasimporters.Thentherearethecoststorunthenationalandlocalelectricityandgasnetworks,VAT,thecostoftechnologiessuchassmartmeters,policycostsforthingslikeenergyefficiencyschemes,andtheprofitsmadebyenergycompanies. AsyoucanseeinthefigurebelowfromOfgem,atypicalhouseholdpayingbydirectdebitwillseeabillincreasefrom£1,277to£1,971.Mostofthatincreaseisdowntothepriceofgas,whichhasdoubledthewholesalepriceofenergyinthebill,fromaround£500-worthofthepreviousbill,tomorethan£1,000. Breakdownofcostsintheenergypricecap:(basedondualfuelcustomerpayingbydirectdebit,typicalenergyuse) Ofgem Networksarethenextbiggestcost,makinguparound£371ofthenewcap–anincreaseof39%.Partoftheincreaseinnetworkcostisbecausemanysmallerenergysuppliershavegonebustrecently,andwhenasuppliergoesbust,othercompaniesareaskedtotakeontheircustomers.Thesupplierswhodothisareknownasthe“supplieroflastresort”.Becausetheymayhavecostswhichcan’tberecoveredwhentheytakeonnewcustomers,thecostisspreadovereveryone’sbills. Operatingcostscoverthegeneralcostsofcustomerservicesandbilling,aswellasaprofitmargin.BigprofitsbeingreportedbythelikesofShellandBPareprimarilybecauseofthesalesofoilandgastheyaremakinginthewholesalemarket,sothisisdifferenttotheprofitsofyourenergysupplier. Muchhasbeensaidonwaystocutthepolicycosts,whichwillbeslightlylowerunderthenewpricecap.Thisisnotonlylimitedinimpactonbills,sincethepolicymeasuresmakeupjust8%ofthepricecap,butalsoshortsighted.Thesepolicymeasuresaretosupportenergyefficiencymeasuresandrenewableenergytechnologies,exactlythestuffdesperatelyneededtoreducerelianceongas(althoughthepolicyispaidforfromelectricitybills).Infact,policycutsbackin2013areestimatedtonowbecostingUKenergybillpayers£2.5bn. Sowhatcanwedo? OneargumentisthattheUKshouldproducemoregaswithinitsownborders.Butthiswon’tsolvetheproblem,sincegasisaglobalcommodityandpricesintheUKaredeterminedbasedonglobaltrades,regardlessofwherethegasisextracted.UK-producedgasexportstomainlandEuropeinOctober2021weremorethanfourtimesthatofthepreviousOctobersimplybecauseitwasmoreprofitable. ProtestsagainsttherisingcostoflivinginLondon,February2022. BjankaKadic/Alamy Clearly,toreduceitsexposuretogaspricestheUKneedstouselessgas,eitherbyusingadifferentfuelforheating,lightingandcooking,orbysimplyusinglessenergyinthefirstplace. Touseless,thecountryneedsaprogrammeofenergyefficiencymeasuresanditneedsiturgently.Thisprogrammeneedstotacklethosehouseholdsmostinneedfirst–colleaguesandIhaveshownthatenergyefficiencyimprovementsenablehomeownerstoaffordtoheattheirhomesforlongerperiodsoftheday–andweneedtoworkoutafairwaytopayfortheseimprovements.Usinglessenergyisawin-win,sinceitreducesrelianceonnaturalgas,supportsthetransitiontonetzero,andreducesenergybills. Thoughthegovernmenthasannouncedsomemeasurestoplasterovertheproblem,noneclearlytargetthosemostinneed.ThedividebetweenrichandpoorintheUKisexpanding.Thepriceofenergyanditsassociatedimpactoncostoflivingisatickingtimebombwhichwemusttackle,toreduceinequalityandraiselivingstandardsforall. Energyefficiency Gasprices Energyprices Ofgem UKenergy energybills Events Moreevents Jobs ResearchFellow,AuthenticationTechnologies Lecturer/SeniorLecturerinMarketing ClinicalEducationStrategy&RiskProjectOfficer Dean,LearningandTeachingInnovation HealthEconomist Morejobs EditorialPolicies Communitystandards Republishingguidelines Analytics Ourfeeds Getnewsletter Whoweare Ourcharter Ourteam Partnersandfunders Resourceformedia Contactus ​ ​ ​

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