UK consumer price inflation reached 9.1% in the year to May 2022, the highest rate for 40 years, according to analysis published by the Energy and Climate Intelligence Unit (ECIU) on 5 July 20221. The ECIU attributes over a third of that rise, 3.2 percentage points, to energy prices driven by the gas and oil crisis1.
The same analysis puts the energy contribution to inflation at 2.3% for households using electricity for a heat pump and an electric car, against 3.3% for households using fossil fuels, which the ECIU describes as almost a third lower1. Within the year to May, gas price inflation was almost double that of electricity, making heating an efficient home with a heat pump more than £220 a year cheaper than heating an average home with a gas boiler, while petrol price inflation of 30% left electric vehicles charged at home £780 a year cheaper to run1. The ECIU states that overall savings for homes avoiding fossil fuels stood at £1,000 a year in May, rising to £1,180 a year by late June as petrol prices climbed, and that the gap could grow to around £1,600 a year if petrol prices keep rising and bills rise again with the October price cap1.
"Homes and cars powered by electricity are not just cheaper to run, they're much less polluting and are increasingly running on British offshore wind. These net zero technologies are allowing more and more homes to break free of the oil and gas markets that have Putin's hands on the levers, doing their bit for their own and the UK's energy security."
On costs of the technologies themselves, the ECIU gives heat pump prices starting at £4,000 with a typical price of £6,000, supported by a £5,000 grant under the Boiler Upgrade Scheme, which it says can bring the price down to the level of a gas boiler1. It adds that the Government is working with industry to reduce heat pump costs by up to 50% by 2025 and to parity with a boiler by 20301. Grants of £1,500 were previously available towards a new electric car, but the Government has announced the end of that support1. The ECIU also cites 40,000 battery electric vehicles changing hands on the second-hand market in 2021, up 119% on 20201.
| Measure | Figure given |
|---|---|
| Inflation, year to May 2022 | 9.1%1 |
| Energy contribution, fossil fuel household | 3.2 percentage points1 |
| Energy contribution, electric household | 2.3%1 |
| Heat pump versus gas boiler heating, annual | More than £220 cheaper1 |
| EV versus petrol running costs, annual | £780 cheaper (May), £960 (late June)1 |
| Overall saving, electric household | £1,000 (May), £1,180 (late June)1 |
Why it matters for households
The figures set out how much of the inflation households experienced in the year to May came from the fuels a home runs on, and how that contribution differs by heating and transport technology. For a home using gas for heating and hot water and petrol for its car, energy accounted for 3.2 percentage points of the 9.1% rise; for a home using electricity for both, the ECIU puts the figure at 2.3%1. The ECIU's comparison of running costs rests on the gap between gas and electricity price inflation and between petrol and domestic charging, and it notes that analysts expect high energy and fuel costs to persist for many months1. It also states that UK households are spending at least £35 billion a year more on heating and car travel than they would in an electric future1. The ECIU adds that low-income households will need support to buy clean technologies1. Wider context on how domestic prices have moved is set out in UK domestic energy prices over time, and the official series behind these figures appear in Official UK Energy Statistics.
What happens next
Energy bills are set to increase further in October, with the average dual fuel bill likely to reach £2,800 according to Ofgem's latest forecast cited by the ECIU1. The ECIU says petrol price volatility has led some to forecast prices of well over £2 per litre1. The £5,000 Boiler Upgrade Scheme grant remains in place under the scheme as described1; uptake figures are tracked in Boiler Upgrade Scheme statistics, and the share of installations using it is covered in what share of heat pump installations use the Boiler Upgrade Scheme.