Understanding the current energy crisis
You may have seen it in the news, you may have heard it from your energy supplier, or you may already be feeling the pinch. The UK energy crisis is underway this winter, but what does this mean?
Here, we will summarise what is going on in the energy industry and what you can do to keep your energy costs down. We recommend sticking to your current energy provider and starting to plan what you can do to improve your household’s energy efficiency.
What has caused the energy crisis?
Many factors have contributed to the conditions we are experiencing right now, but here we can provide a very brief overview of the main contributors to the energy crisis. The UK’s energy mix is still too reliant on fossil fuels and, as a result, we are heavily impacted by an international increase in the cost of energy resources. Almost half of the UK’s energy is produced by burning gas, and after a particularly cold winter last year, the UK’s gas stores have become depleted. This means the country has had to purchase and import lots of gas from international markets. Usually buying gas internationally does not affect us too much, but as this has been timed with the global recovery from Covid-19, demands for energy resources have pushed prices extremely high. The cost of purchasing gas at this higher rate makes it more expensive for companies to produce energy, and this cost is being pushed on to the consumer.
What does this mean for consumers?
Some smaller energy providers are unable to afford this increase in cost, which has so far caused 29 energy providers to go bust and displaced almost 4.5 million customers. Because of this, many people are missing out on some of the best rates that were available in the energy market, and are being placed on much more expensive tariffs. Energy prices are now rising significantly, and we will see prices jump this April and again in October.
The government has an energy price cap in place to protect consumers. Right now, this is doing a good job at shielding customers from sudden, sharp rises in cost in the short-term as it is forcing energy prices below the cost of current energy production. This does not mean there is a cap on the bill you pay, it means there is a cap on the unit price that gas and electricity can be sold at. So, if you use more energy, your bills will still go up. But this will change in April; the price cap will rise by 54%.
This will affect everyone differently, depending on the houses we live in, the people we live with and the way we use our energy, but we can think of this on average. If we imagine the average energy consumption of a family of 4 in a new build home, or perhaps 3 people in a terraced house, we would expect them to use around 12,000 kWh of gas and 3,100 kWh of electricity a year. They would see the price they pay for energy increase from around £1,277 to around £1,971 per year.
Similarly, it’s predicted that energy prices will rise even further in October, so this average yearly bill may exceed £1,971 for this family of 4. It is a bit too early to tell for certain, but it is clearly important to take both short-term and long-term steps to reduce your energy consumption and keep your energy costs down.
What can I do?
Right now, it is really important that if you are on a fixed priced tariff you do not change energy providers. Where it may have previously saved you money to be savvy and switch between providers each year to make the most of cheap deals, that is no longer an option. It is better that you remain with your current energy provider on your current fixed price tariff until you come to the end of your contract, and only then compare the deals on offer.
In addition to this, being energy efficient is crucial during this period. Ultimately, if you use less energy, your energy bill will go down. Energy efficiency is always important, whether you are concerned about your environmental impact, you want to save yourself a few pounds here and there, or you like to make your home that little bit cosier. Now more than ever, it is key to make those small changes to your energy usage habits. You can find many small tips and lifestyle changes online and we will outline some of these in the coming weeks.
As energy prices are going to remain high for a while, it is also important to consider taking the steps to improve your household’s energy efficiency for years to come. Your home’s insulation, the windows and doors you have and the appliances you buy all contribute massively to your energy consumption. To enable homeowners in Birmingham to do this, Community Energy Birmingham is launching a paid Home Energy Advice Service. This will help to reduce your household’s energy bills and carbon footprint by advising personalised energy-saving measures and promoting the use of renewable energy. This service will include a physical assessment of your home to identify potential opportunities for retrofit and personalised energy usage advice and lifestyle improvements.
If you are interested in taking advantage of this brilliant service, you can sign up to our mailing list to find out when the Home Energy Advice Service is officially launched later this year. In addition to this, we can also give you occasional updates about the work being done by Community Energy Birmingham so you can keep track of how Birmingham is working towards becoming carbon neutral by 2041.