The Energy and Climate Intelligence Unit (ECIU) updated its analysis on 8 September 2022 to account for the Government's announcement of the Energy Price Guarantee, under which energy prices will be frozen at £2,500 for the average home1. The update followed confirmation by the new Prime Minister, Liz Truss, that "green levies" that in part pay for insulating poorer homes will be moved from bills to general taxation1.
The ECIU's central finding is that, with bills frozen at £2,500 on average, every pound invested in insulation will effectively be paid back by the end of Q1 2025, based on industry price predictions, a steady gas price in 2024 and the scheme extending beyond the current two-year period1. Investment of as little as £1,000 per home could cover a basic package of measures, such as loft insulation, cavity wall insulation and heating controls, moving an Energy Performance Certificate band D home, described as the UK average, to band C, the Government's target for 20351. Around 10 million properties lack one or both of loft and cavity wall insulation1. In addition to the saving to Treasury, the ECIU states that the homes themselves will save £600 from their bills1.
The analysis sets the Guarantee against earlier price forecasts. Ofgem's price cap for October 2022 was set to be £3,549, and Cornwall Insights forecast bills of £5,387 in Q1 2023, £6,616 in Q2 2023, £5,897 in Q3 2023 and £5,887 in Q4 20231. The ECIU notes that experts predict bills being even higher next winter, at £5,887, and not returning to pre-gas crisis levels by the end of the current Parliamentary term in 20241.
| Forecast | Level |
|---|---|
| Ofgem price cap, October 2022 | £3,549 |
| Cornwall Insights, Q1 2023 | £5,387 |
| Cornwall Insights, Q2 2023 | £6,616 |
| Cornwall Insights, Q3 2023 | £5,897 |
| Cornwall Insights, Q4 2023 | £5,887 |
| Energy Price Guarantee, average home | £2,500 |
The ECIU cites the Energy Company Obligation (ECO) as having provided energy efficiency retrofit into over 2.3 million homes since 2013, and states that the energy industry has confirmed it could insulate 500,000 homes this winter and 1 million homes per year from 2023 through a ramping up of the scheme1. It also cites polling by Opinium for the ECIU, conducted between 30 August and 1 September 2022 among 3,001 GB adults, in which 54% of respondents rated energy a top three issue compared with 50% for health, and 28% said they were struggling now with energy bills, with a further 47% expecting to in future1. Support for freezing the price cap stood at 85%, and for incentives and investment for homeowners and landlords to improve home insulation at 82%1. Separate ECIU polling of Conservative Party members found 85% support for such incentives and investment1.
"The new Prime Minister Liz Truss has confirmed that 'green levies' that, in part, pay for insulating poorer homes will be moved from bills to general taxation"
The ECIU states that the UK is being worst hit by the gas crisis because of the poor energy efficiency of our homes and a heavy reliance on gas, attributing the assessment to the IMF1. It adds that if the levy change leads to no significant increase in the rate of insulating homes, which has dropped dramatically in the past ten years, many households will be locked into higher bills for years to come1.
Why it matters for households
The analysis links the cost of the price freeze to the condition of the housing stock. Where a home is insulated, less of the money spent on heating is lost through the roof and walls, which reduces both the household bill and the cost to the Treasury of holding prices down. The ECIU's £600 figure is the saving it attributes to the homes themselves under its modelled package, on top of the effect on public spending1. The 10 million properties it identifies as lacking loft or cavity wall insulation are the households for whom the gap between the frozen price and the underlying market price is largest in practical terms, because more of what they pay goes to heat that escapes. The ECIU's framing of energy bills and energy independence rests on the argument that a poorly insulated home is more exposed to gas prices, and that reducing heat loss reduces that exposure. The analysis does not set out eligibility rules or delivery arrangements for any insulation programme, and no such scheme details are reported in it. Households in energy debt are directed elsewhere: the British Gas Energy Trust provides grants, and the bills and price cap pages cover the wider framework.
What happens next
The ECIU's cost-neutrality finding depends on stated conditions: industry price predictions, a steady gas price in 2024, and the scheme extending beyond the current two-year period1. The analysis does not report a Government commitment to an insulation programme of the scale modelled, and no start date, funding total or eligibility criteria for one are given in it. The ECIU notes that the rate of insulating homes has dropped dramatically in the past ten years, and that the effect of moving green levies to general taxation on that rate has not been reported1.