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The energy bill freeze is set to conclude in April 2023, but the big question is, will we see a drop in our energy bills in 2023?

We’re living through an “unprecedented cost of living crisis”, which has hiked the price of food, petrol and, most concerning for UK households, energy bills. Market analysis from Cornwall Insights has predicted that without further government action typical energy bills could reach £3,700 a year by April 2023.

In another move the energy regulator Ofgem set the price cap at an annual rate of £4,279 for January 2023, but households will remain shielded by the government Energy Price Guarantee, which will keep annual average bills under this figure.

This, however, only limits the unit price of the energy, so this doesn’t mean you won’t see higher bills if you’re using more energy. This limit of unit prices will roughly equate to the following for the average household:

• Energy bills on average will sit at around £2,500 per year until April 2023.
• From April 2023 until the following April, households are expected to fork out around £3,000 per year on average.

This steep rise in energy prices is due to several mitigating factors, such as inflationary increases, the shortage of gas supply caused by the pandemic, and the Russian invasion of the Ukraine.

In this piece, we’ll be exploring what the future might hold for energy prices beyond April 2023 and what the chances are of an increase in costs.

What Can Expect From Energy Prices in 2023?

Ofgem has confirmed the energy price cap from the 1st of January 2023 to March 31st will be rising to an average annual cost of £4,279. This is a huge £730 increase from the £3,549 price cap introduced in October.

Fortunately, this price cap won’t impact households due to the energy price guarantee, which was introduced earlier this year, to protect households until April 2023 on the current £2,500 cap.

Of course, a ‘cap’ doesn’t mean you can use as much energy as you like, and the £2,500 limit is an average not the maximum amount you’ll be charged.

Once the Energy Price Guarantee ends, the average household energy bill will rise to £3,000 per year in April 2023, until April 2024. That’s an estimated increase of £500 a year for households, with the £400 energy discount also ending in March 2023. 

Although this represents a huge hike for most households, it is lower than the original Cornwall Insight’s prediction of £3,700.

Specific unit prices for April 2023 haven’t yet been announced, but are likely to be revealed early in 2023.

What Will Happen to Fixed Rate Deals?

If you’re locked into a fixed tariff, you should still continue to receive the energy price guarantee until April. 

However, if you’ve managed to secure a decent, low rate previously then it’s best to stick with it for now, since it’s not likely you’ll find a better deal elsewhere at the moment. 

Why Are Energy Prices Soaring?

Image from BBC

There are few factors contributing to the soaring energy costs, but one of the main reasons is the Russian squeeze on sending gas supplies to Europe.

The UK relied on Russia for a small fraction of its gas, before the Ukraine invasion. However, Russia manages the pipeline connected to Europe and around 40% of the continent relies on Russian gas supply.

This means British energy suppliers are required to pay similar prices for their energy units as the rest of Europe.

British households are also at a disadvantage since most homes (85%) are heated by gas boilers, when compared to significantly fewer homes in France and Germany (50%) and the fact that 40% of the UK’s electricity comes from gas-fired power plants. 

What Help Will Be Available?

The energy price guarantee won’t impact the £400 energy grant that every household was given to every household in October, this may have been applied to your credit with your energy supplier.

While the £400 will help households during the coldest months of the year until March, from April, as mentioned, the cost cap will increase and we know that while the energy price guarantee will continue, it will be scaled back significantly – we don’t yet know how this might look. 

Most energy suppliers have support lines to help any customers struggling with payments. These may include debt write-offs and grants for those that are really feeling the pinch. 

In most cases, you need to be an existing customer to access help, with the notable exception of the British Gas Energy Trust which is offering grants of £1,000 or more to help struggling customers no matter their supplier. 

If you find yourself struggling, it’s important to contact your supplier as soon as you can to arrange a payment plan to suit you. Before calling ensure you have all the information you need, such as account numbers, up to date energy readings, and household incomings and outgoings to ensure you can reach the right person to help you quickly and efficiently.

If you’d like any more advice about what we’ve covered in this blog, or you’d like to learn about any of our other products or solutions, then why not contact us today for more information?

Renewable energy grew at record pace in 2021, says a new report compiled by the International Energy Agency (IEA).

While this is, of course, welcome news, the IEA also cautioned that the world is at serious risk of missing the mid-century deadline to achieve net zero carbon emissions if we continue rolling out renewable energy solutions at the current pace.

In this blog, we’ll be rounding up exactly what the IEA report outlines and some of our own thoughts  too.

Background

The rise in the deployment of renewable energy solutions came despite increasing costs for the key materials required to manufacture solar panels and wind turbines. This shows how, even at higher costs, the renewables sector is growing to satisfy a global demand for cleaner, greener energy.

By the end of 2021, new renewable power capacities are expected to rise to 290 gigawatts, which outstrips the previous record set in 2020, of 280 gigawatts.

In the coming years renewables will be at the forefront of growing energy infrastructure, and according to the report, will account for 95% of the total increase in global power capacity, which means a rise of over 60% from levels we saw last year, to almost 5,000GW by 2026.

The Report Explained

The IEA report outlines, that on the current path, in five years’ time renewable energy will match global power capacity of fossil fuel and nuclear power combined.

The report also demonstrates how big a role solar power is playing in increasing reliance on renewable energy, with photovoltaic solar power offering more than 50% of the new capacity, due to come online in the next five years.

The record renewable supply of 290 GW’s is just another sign that there is a viable alternative to the fossil fuel industry, and a new economic sector is ready to take the mantle.

Although inflated costs for materials and energy is yet another burden to bear for the industry, we’re also seeing spiralling fossil fuel prices running parallel, which is turning renewables into a genuine, reliable alternative.

Foreign Expansion

The IEA report has landed during the grip of an energy crisis across Europe, and more specifically in the UK. Concerns have been raised that without a complete overhaul of the UK’s energy market, almost 90% of electricity generation in this country is set to be backed by government contract.

It’s because of this, analysts warn that by 2035 UK energy providers will limit incentives in response to supply and demand, due to sustained government backing.

It’s actually China that leads the way when it comes to adding renewable energy capacity, while India is the country with the highest rate when it comes to increasing renewable energy projects.

The report by the IEA explains that China is projected to hit 1,200GW of total wine and solar capacity in 2026 – this is four years shy of their original 2030 target.

When compared to the five years between 2015 to 2020, India is expected to double their wind and solar installations. This growth trend is also expected in Europe and across the pond in the US too.

In fact, between India, China, the US, and Europe renewable energy capacity accounts for 80% of the worldwide total.

The increasing renewable support in India is helping to bolster the government’s announcement of attempting to hit 500GW of renewable energy capacity by 2030, and shows how far India has come when it comes to pushing the clean energy agenda.

Despite consistent criticism of their emissions, China has continued to demonstrate their strengths when it comes to expanding renewable energy projects.

Progress Must Continue

Despite the positives from the report, the warning still remains: ‘progress must continue, and must continue at a faster pace than we are currently seeing’.

The report states that governments must encourage further growth in the sector by addressing crucial obstacles, such as grid integration challenges and inconsistent approaches on policy from country-to-country, and government-to-government.

This is coupled with high financial burdens for the developing world and inconsistent remuneration from leading nations which are also blocking the pathway too.

The report concludes that even in a scenario where the road is cleared, the shift to a renewable energy infrastructure will still fall far shorter of what would be required to hit net-zero by 2050.

These warnings come as the UK’s target of hitting 40GW of wind power by 2030 looks increasingly likely to fall short, with experts claiming that hitting such a target would mean the country must construct the equivalent of a 1.2GW offshore wind farm (the likes of which has never been built before in the UK) every ten weeks for the coming two decades.

If you’d like to learn more about what we’ve covered in this piece, you’re interested in alternative energy solutions, then why not contact us today for more information.