The government published its Energy Security Strategy on 11 April 2022, setting out plans to boost Britain's energy security following rising global energy prices and volatility in international markets1. Among the measures, the Department for Business, Energy and Industrial Strategy (BEIS) committed to "rebalancing" the costs placed on energy bills away from electricity to incentivise electrification across the economy, and said it would publish proposals on how to do so in 2022, considering overall system impacts and limiting the impact on bills, particularly for low-income consumers1.
The strategy also set out changes affecting the cost of home improvements. The installation of households' energy saving measures is to be VAT free for the next five years, which the government estimated would reduce the cost to consumers of insulation, double glazing, installing solar panels and heat pumps, saving families £200 off the cost of installation1. A £450 million Boiler Upgrade Scheme was confirmed, and heat pump manufacturing is to be expanded through a Heat Pump Investment Accelerator Competition in 2022, estimated to be worth up to £30 million to make British heat pumps1.
On supply and generation, the strategy set an ambition to double UK low carbon hydrogen production capacity up to 10GW by 2030, and for the UK's current 14GW solar capacity to grow up to five times by 2035, with a consultation on the role of solar projects on domestic and commercial rooftops1. Funding to develop and pilot new green finance products for consumers is to double from £10 million to £20 million1. The National Insulation Association, which reported the strategy, noted that while key announcements focused more on additional supply, there were also aspects covering energy efficiency and demand reduction, though it described the vast majority of the announcement as old news1.
"BEIS will publish proposals on how to do so in 2022, considering overall system impacts and limiting the impact on bills, particularly for low-income consumers"
| Measure | Detail |
|---|---|
| VAT on household energy saving measures | Zero for five years; estimated £200 saving on installation |
| Boiler Upgrade Scheme | £450 million |
| Heat Pump Investment Accelerator Competition | 2022; worth up to £30 million |
| Green finance products funding | Doubled from £10 million to £20 million |
| Low carbon hydrogen capacity | Up to 10GW by 2030 |
| Solar capacity | 14GW now, to grow up to five times by 2035 |
Why it matters for households
Most of the costs that make up a household electricity bill, including policy costs and levies, are currently loaded onto electricity rather than gas. Rebalancing them would change the running cost comparison between a gas boiler and an electric heat pump, which is central to whether a home can cut its reliance on gas. The strategy states the aim is to make heat pumps comparatively cheap to run over time1. For a household considering electrification, the practical effect depends on the proposals BEIS has yet to publish, and on how far they limit the impact on bills for low-income consumers1. The VAT change reduces the upfront cost of measures such as insulation, double glazing, solar panels and heat pumps, which affect how much energy a home needs and where it comes from, and so bear on energy bills and energy independence.
What happens next
BEIS is to publish proposals on rebalancing costs in 20221. The Heat Pump Investment Accelerator Competition is also scheduled for 2022, and a consultation on the role of solar projects on domestic and commercial rooftops is to follow1. No dates beyond the year have been reported.