Energy affordability: rewiring the rules for a warmer Britain
www.nesta.org.uk/feature/energy-affordability/
www.nesta.org.uk/feature/energy-affordability/
Electricity is too expensive, both in absolute terms and when you compare it to the cost of gas (known as the price ratio).
For households across Britain, the cost of living remains a defining challenge - and energy affordability consistently ranks as a top concern. With incoming Prime Minister Andy Burnham signaling a desire to act urgently on this issue, the window of opportunity to enact impactful policy change to bring down energy bills is now.
Critically, immediate energy bill relief shouldn’t be done in isolation from the UK government’s wider ambitions to decarbonise homes. In the long term, the most effective way to keep bills permanently low is to transition our homes away from fossil fuels and towards clean, electric technologies like heat pumps. Reducing the electricity-to-gas price ratio is the single most important change the UK government can make for this switch to happen, because it shapes real-world decisions for households and businesses: whether it’s cheaper for them to run a heat pump than a gas boiler, or how attractive electrification looks across different sectors.
These policy options do both of these things: dramatically reducing bills by over £100 for a typical dual-fuel household while delivering changes that will support electrification and home decarbonisation by significantly reducing the price ratio.
Introduce a formal mission target to ensure that clean heating options are universally cheaper to run than fossil fuel boilers, providing certainty for consumers and aligning government departments behind a shared goal.
Shift fixed gas standing charges onto unit rates to create a progressive rebalancing that cuts bills, benefits lower-income households and reduces the price ratio, at zero cost to the treasury.
Deploy fiscal policy to smooth out volatile spikes, shield consumer budgets, and ensure that brief periods of low gas prices don't undermine long-term investments in clean electrification.
Full proposal being published soon.
Undertake an exceptional, one-off intervention to clear electricity debt that has accumulated and is currently paid by all consumers through their bills.
Alongside these options, removing the costs of the remaining Renewables Obligation and Feed-in-Tariff from electricity bills into taxation is a promising option to lower bills and lower the price ratio, as well as cutting VAT to zero. These ideas are covered within these proposals.
