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Rebalancing energy policy costs crucial to delivering a low-carbon future

Cornwall Insight and the MCS Foundation are delighted to announce the release of a new report ‘Policy costs in domestic energy bills’. The report examines the critical role shifting policy costs away from electricity bills could have to the decarbonisation of residential heating and the UK’s journey to a low-carbon future.

Decarbonising home heating is essential for the UK’s energy transformation. With approximately 17% of the UK’s greenhouse gas emissions stemming from residential buildings, primarily due to gas usage for heating and cooking, reducing these emissions is vital for achieving net zero.

Electrifying heating is widely recognised as critical to the UK’s decarbonisation journey, with unabated consumption of gas, including in domestic boilers, incompatible with net zero goals, and potential hydrogen-based solutions decades away.

While we are witnessing a significant shift of households to electricity powered heating options, price disparity between gas and electricity costs for consumers are one of the barriers to further adoption.

The report lays out how a rebalancing of policy costs could encourage electricity use, and the adoption of low-carbon technologies. As well as lead to indicative annual savings of up to £300 for households, depending on the levies shifted.

Cornwall Insight’s report provides a comprehensive analysis and a call to action for policymakers and industry stakeholders. By addressing the price inequality between gas and electricity and supporting the adoption of low-carbon technologies, the UK can make significant strides towards its net zero goals.

Government recommendations:

  1. Take steps to provide detail on options to rebalance policy costs, that would reduce the amount paid by electricity dependent customers
  2. Implement targeted support measures such as social tariffs to mitigate the impact on vulnerable groups at risk during the energy transition
  3. Continue to encourage the use of low-carbon heating technologies through incentives, where they offer greater energy efficiency over gas boilers and could lower annual costs when coupled with a lower baseline electricity price

Kate Mulvany, Principal Consultant at** Cornwall Insight** said:

“While the electrification of heating is widely accepted as critical to the UK’s net zero ambitions, we must recognise the financial barriers households encounter when looking to make the transition over to electric heating and low-carbon technologies.

“Our report illustrates that through addressing the price inequality between gas and electricity, households could be empowered to make environmentally friendly choices and save money at the same time.

“By reducing the cost of the electricity transition, we can help foster a cleaner, healthier, and more resilient society for future generations.”

David Cowdrey, Acting Chief Executive at the MCS Foundation, said:

“The UK’s disproportionately high electricity prices are not only driving fuel poverty, they are also holding the country back from the roll-out of heat pumps that we need to reach net zero.

“There is a wide coalition of support for reforming electricity prices and implementing change should be a top priority for the new Government.

“Moving levies off electricity bills into general taxation would incentivise heat pump uptake and tackle fuel poverty, a win-win.”

Notes to Editors

For more information, please contact: Verity Sinclair at v.sinclair@cornwall-insight.com

To link to our website, please use: https://www.cornwall-insight.com/

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About the Cornwall Insight Group

Cornwall Insight is the pre-eminent provider of research, analysis, consulting and training to businesses and stakeholders engaged in the Great British, Irish, Australian, German and Japanese energy markets. To support our customers, we leverage a powerful combination of analytical capability, a detailed appreciation of regulation codes and policy frameworks, and a practical understanding of how markets function.

"Our report illustrates that through addressing the price inequality between gas and electricity, households could be empowered to make environmentally friendly choices and save money at the same time."

Kate Mulvany Principal Consultant
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