An Ofgem price cap announcement resulting in rising energy costs is a familiar story for homeowners during the last twelve months. Amid a crippling cost of living crisis, the prospect of paying even more for electricity is difficult to comprehend, but the latest update from the industry regulator offers little respite in the short term.
Prices will soar by 20% from April, adding around £900 annually to the typical UK household energy bill. The irony is that Ofgem has cut the price suppliers can charge customers per unit of energy. That would typically benefit consumers, but easing government support via the Energy Price Guarantee (EPG) means the amount people pay will rise.
TUC general secretary Paul Nowak didn’t pull any punches in his assessment, claiming energy prices “are out of control”. Neither did money-saving expert Martin Lewis who branded them as a “national act of harm”. There is a growing chorus of dismay and outrage at spiralling energy costs, which are unlikely to fall for at least another 18 months.
If you are worried about your bills, Vision2030 is here to help. We will break down everything you need to know about the latest hike, so you understand precisely how you’re affected. We will also outline the benefits of cleaner and free energy alternatives like solar, which can reduce your energy bills by up to 80%.
What changed in the latest update?
Ofgem’s announcement appeared to offer a glimmer of hope for homeowners as its price energy cap was cut from £4,279 to £3,280 in response to a decline in wholesale prices. However, the end of the government’s £400 winter support scheme means the EPG threshold will jump to £3,000 on 1 April. The EPG previously capped energy unit prices, so the average household didn’t pay more than £2,500.
The price cap is based on each unit of energy and is not a maximum limit. This means the exact amount you pay will depend on how much energy you use, but typical yearly bills will rise to £3,000. It’s yet another increase at a time when people are struggling to afford a range of essential goods and services. It’s no surprise, then, that many households are looking to install solar panels this spring and summer to mitigate the impact of surging energy costs.
With government support being phased out, you can take back control of your energy consumption with a greener, cleaner PV solar and battery storage system. The PV cells in solar panels turn sunlight into energy which you can then use to heat your home or power your appliances. In Bristol, there are an average of 219 hours of sunshine in July. Imagine using the world’s most preeminent natural resource to cut your monthly outgoings drastically.
Why are energy prices still so high?
People are turning to renewable energy sources en masse because there is no end in sight to surging energy costs. There are currently factors, both in the UK and globally, that are exacerbating issues with supply and demand and making gas and electricity more expensive than they normally would be. The war in Ukraine has been well documented, and the reverberations from the ongoing conflict are still being felt. The closure of Nord Stream 1, a pipeline between Russia and Germany, has restricted gas exports across Europe.
Fortunately, the UK is not as dependent on Vladimir Putin’s increasingly isolated regime for energy, but problems closer to home have also affected supply, storage and prices. The broader industry has buckled under the weight of soaring wholesale costs; no less than 28 energy suppliers across the country have ceased trading during the last two years. The closure of Bulb was a notable blow as the government had to put it into “special administration”, which is set to cost around £6bn.
The energy market’s precarious nature is another reason homeowners are turning to renewable alternatives. Did you know you can sell the surplus electricity you generate from solar panels back to the grid via the Smart Export Guarantee (SEG)? Keep an eye out for our upcoming blog on the SEG, where we will go into greater detail about the government-backed initiative and how it will help you to drive a better return on investment (ROI) from your PV solar and battery storage installation.
Will things get better?
After a turbulent few years, consumers are desperate for a return to normality, but industry experts expect the energy industry to remain turbulent even if wholesale prices continue to trend lower. Centrica chief executive Chris O’Shea says there is no “no reason” prices will fall in the short to medium term, which means electricity from suppliers will remain expensive for another 18 months to two years at least.
Ofgem’s Jonathan Brearley echoed those sentiments and admitted that prices are “unlikely” to return to the level seen before the energy crisis began, which was also triggered by the pandemic and a sudden increase in demand for commodities. The industry regulator is forecast to reduce its cap again in July, when it may fall below £3,000, but it will make little difference for consumers for now.
The government is receiving criticism for scaling back support amidst the chaos, though there is one upside – people will be less reliant on energy to heat homes during the warmer months of the year. With the days getting longer and summer on the horizon, it’s the perfect time to embrace clean energy alternatives which use the sun to generate electricity. It’s one of the best methods for lowering your bills, reducing your carbon footprint, and upgrading your home for a sustainable future.
Vision2030 has an experienced team of surveyors who can come and look at your property and provide a no-obligation quote for a bespoke PV solar and battery storage system. Whether you are a business or an individual, we can make solar work for you. Contact us to start the process today and see how much you could reduce your energy costs this year.
Update: Reports suggest the government could continue support for homeowners by extending the Energy Price Guarantee at its current level until the summer. A final decision is expected to be announced during the Spring Budget, which is set to be held on 15th March.