Energy bosses in the UK have called for the price cap to be scrapped in order to protect households from an upcoming ‘horrific’ winter. The biggest UK energy suppliers have voiced their concerns, requesting a new system to be put into place and the price cap to be abolished.
These unprecedented measures come after record rises in energy prices, with vulnerable households being hit the hardest. With a fuel poverty crisis looking more likely, decisions need to be made by the government to support homes across the nation.
Currently, pre-payment customers are still reeling from the effects of rising bills, with numbers only expected to rise when the latest price cap is announced in October. It is estimated that there will be further increases issued.
In April, the price cap rose by £693 per year on average, a record here in the UK. However, pre-payment customers are typically the most vulnerable customers. will be facing an even bigger increase next winter.
Calls for the price cap to be scrapped for a more social tariff have been raised by ScottishPower chief executive Keith Anderson. The Business, Energy and Industrial Strategy (BEIS) committee heard the boss discuss how the price cap had led to dozens of competitors failing.
A record number of energy firms went bust over the last few years due to not being able to pass on huge rises in raw energy costs to customers. A new price cap would see the better off paying more.
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Other suggestions included a deficit fund. This fund would be set up to support those who are deemed as struggling. A 10 year period would be given to these customers to pay off £1,000 on their bills.
E.ON boss Mike Lewis also spoke about the issues facing families, as from October, up to 40% of households could be facing fuel poverty due to rises in energy use and further adjustments to the price cap.
There was support for the social tariff, however, calls for the government to take action were raised. In addition to the energy loan and Council Tax rebate, more needs to be done, such as short term removals of green levies and VAT.
British Gas owner Centrica, had their boss Chris O’Shea discuss the rises in prices. In just the past 12 months, 125,000 households had been placed in debt, with a total of 715,000 people owing money to British Gas.
This number is only likely to climb, especially after the impact of the October announcements. Predictions from industry specialist Cornwall Insight have forecasted an almost £500 soar to the average annual bill.
Prices have risen further after the global impact of wholesale energy costs since Russia’s invasion of Ukraine. The new rises would leave the average annual bill beyond £2,450.
Russia’s ongoing war has made the cost of living a lot worse for European nations, with the global economy seeing steep increases. Just the UK alone is currently witnessing 30-year highs in inflation. There hasn’t been a larger drop in living standards since the 1950s.
Along with skyrocketing energy bills, food prices have also seen spikes, like with the current energy industry turbulence. Combine this with Russia and Ukraine producing roughly 15% of the world’s wheat and other goods, the situation looks bleak.
Inflation is expected to peak at 9% according to the OBR, however, double-digit figures can not be ruled out. With families facing the startling decision between eating or heating from October, there needs to be a quick solution.
Slowdown In Onshore Wind Could Cost UK Residents
Analysis from the Energy & Climate Intelligence Unit has shown that UK households may face increases of up to £125 on their energy bills. This rise is due to the failure to expand the roll-out of onshore wind.
Recently, the UK government issued new targets as part of the latest Energy Security Strategy, however, no new targets were made to ensure wind. Currently, there is 14GW of onshore wind in the UK. The figure will rise to 20GW when planning consent is given to under construction turbines.
Furthermore, UK households may see their energy bills soar if the sector stops at 20GW, as well as not reaching the set targets. By 2030, if the nation doesn’t reach the rumoured target of 30GW, this 10GW shortfall may cost £4bn each year, adding an additional £50 per household.
Looking further ahead to 2035, a shortfall of 25GW of onshore wind may cost £10bn each year, placing a further £125 per household on energy bills. This shows how important renewable energy will be in the near future.
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Current figures show that by not investing in onshore wind, the cost could be catastrophic. The current gas crisis has swept across Europe and placed families in tough situations, some having to choose between heating or eating.
If there were to be another slow down in the build-out of onshore wind, then another future gas crisis could see the government having to explain to households why an additional £125 has been placed on energy tariffs.
One of the most popular energy technologies in the world is onshore wind. Some figures show that 80% of the public backs the source of energy. If homes were able to receive cheaper energy bills, all from a local wind farm, then this figure rises to 87%.
In the recent energy strategy, the decision by the UK government was to keep the curbs on onshore wind. The prime minister has gone as far as backing offshore wind whilst keeping quiet about onshore wind.
Taking a look at some of the issues, in England, it is extremely hard to gain planning permission, as the current rules effectively ban wind farms.
The rules effectively banning wind farms in England are unique to planning in the UK. To avoid this, revised planning policies have been suggested, giving local communities the chance to voice their opinions on whether the benefits outweigh the visual impact.
However, taking a look at the energy side, at the University of Sussex and Denmark’s Aarhus University, a study by scientists showed that on the available and appropriate land, wind farms could meet 140% of the UK and Ireland’s energy demand.
This just shows the potential that onshore wind has to offer in solving the energy crisis, with the UK and Ireland having the potential to generate 2,150 TWh of energy from onshore wind.
£153 Green Levy To Be Scrapped
As the cost of living crisis continues to hit households across Europe, UK chancellor Rishi Sunak could be forced to scrap the green levy tax. This £125 significant green tax may be phased out when the latest Ofgem price cap comes into effect.
As of April 2022, there was a 54 per cent rise in the energy price cap, sending household energy bulls to more than £1,971 a year. To combat this, the green energy scheme may be scrapped.
What Is The Green Levy Tax?
The green levy tax is enforced by the government on sources of carbon emissions or pollution. The green levy tax helps to fund renewable energy subsidy schemes, encourages the use of environmental-friendly alternatives and discourages the use of inefficient sources of energy.
Fossil fuels have led to price rises in the UK, however, now may be a good time to see how much energy you use. The easiest way to do this is by using a free electricity usage calculator to simply see exactly how much energy you use, as well as if you can save money.
Will Scrapping The Green Levy Tax Help The UK?
Scrapping the tax has been seen as a good option by Tory MPs to help ease the cost of living crisis. 23 per cent of the cost of household electricity is made up of the combination of green taxes.
These taxes do play a huge role in funding investments into renewable technologies, as well as improving energy efficiency in poorer households. However, with the cost of living continuing to rise, cuts have to be made in certain areas.
When Ofgem releases the new price cap later on in the year, there are estimates that it could rise by another 40 per cent. When added on to the recent price cap changes, customers on default tariffs could see annual bills rising to £2,800.
Just last month, the chancellor stated that he refused to cut green levies. In his spring statement, £300 worth of support per household was announced to protect homes from the expected energy bills spike.
A £200 repayable energy bill discount and £150 council tax rebate were also announced, but despite these measures, the crisis will continue to hit households hard this winter.