Earlier this year it was announced that British Gas were to raise electricity prices by 12.5% on its variable rate tariff, a rise for the average household of £76. nPower, E.ON, Scottish Power, SSE, and EDF also announced price rises.
Energy prices are based on several factors. About half of your bill is the wholesale cost of gas and electricity, but added to this there are the costs of distribution & transmission, government tax (VAT), environmental costs and meter provision – as well as the supplying companies costs and profit.
Whilst network costs, and environmental costs are going up it is the global wholesale costs that have the biggest impact on your bills.
Higher gas prices have been the biggest driving force of increased energy bills in recent years. As Britain has become more reliant on imported gas the prices we pay has become increasingly influenced by global events, especially those that affect the oil prices. The cost of oil is now a huge driver of British gas prices, this is down to demand and the cost of gas throughout Europe.
The government is currently proposing a reform within the power industry, this includes the upgrading/ replacement of nuclear & coal fired stations – in part this is also to meet EU emissions standards. Network costs are also going to rise as ageing infrastructure needs to be replaced, a low carbon economy is supported, and to allow for the connection of new gas supplies. Ofgem predict that network costs (around 20% of your bill) will increase by around £60 per household over the next decade.
There are many ways to try and keep your utility bills down as prices rise. Firstly is the investment of renewable sources (see next section), but this isn’t the only option.
There is a huge push to encourage people to shop around and switch their providers regularly. This can have an immediate impact on your energy bills. Negotiating a better deal with your current provider is also another way the help protect yourself against price rises.
Using energy price comparison sites such as uSwitch, you can shop around for the best deal on your energy prices. With option to choose between fixed rate and variable rate tariffs you can choose a package and deal that suits you. The other benefit of switching is the increased competition between suppliers who will in turn need to keep prices down in order to gain business.
Other simple lifestyle changes can also have a huge impact, being more aware of your personal usage and making changes where appropriate can help cut the amount you spend, and help the environment. Use the power when the prices are low, if you are on a tariff that changes price depending on time (economy seven) then it is advisable to use things like the washing machine, or charging your phone during the day. Turning off any electrical items rather than leaving them on standby is another way you can cut you electricity usage. Another great way to reduce costs is to swap out all of your light bulbs for LED versions, these are low power, and nowadays, you wouldn’t notice a difference between a LED and a conventional filament bulb.
A large proportion (35-50%) of electricity generated in Britain is achieved by burning gas. Because around 50% of the wholesale electricity price is the cost of the fuels used to generate electricity as these rise so will the price you pay for electricity.
It is estimated that £200 billion will need to be invested by 2020 in order for Britain to meet environmental targets and secure energy supplies. However a greater reliance on renewable energy sources could reduce Britain’s reliance on imported gas.
This can come in two ways, a greater deployment of large scale solar – solar farms. Solar farms can produce enough energy to power whole towns or cities, smaller scale ‘domestic’ solar will help individuals to decrease the cost of their utility bills, combined with battery storage this is a great option. With interest rates in banks very low at the moment many people find that investing in solar is a much more viable option.
With the cost of renewables coming down, and technological advances increasing renewable solutions are as viable as ever, even though the governments feed in tariff has been reduced it is the long term gain that must be looked at. Installing renewables will inevitably protect households from future price rises and with more and more advancements in technology the power generated can be better used, and more of it, meaning less power generation waste.
Prices are going to rise, it’s inevitable, however by taking small steps we can all help reduce bills, reduce our carbon footprint, and save the environment. If you would like more information or advice on renewable options for your home get in touch with one of our renewable energy specialists.