HOW THE GOVERNMENT COULD MAKE YOUR ELECTRICITY BILLS CHEAPER – BUT HASN’T
The cost of electricity must be slashed so people feel the cash benefits of moving to clean technology such as heat pumps and electric vehicles, the Government’s climate adviser has urged.
The Climate Change Committee (CCC) is calling on the Government to remove all the levies on electricity bills – and warns that failure to do so could put the country’s net-zero targets at risk.
These levies include subsidies for wind and solar power and grants to help lower income households buy loft insulation and pay their energy bills.
The CCC estimates that removing them would cut £190 a year, or 22 per cent, from the typical UK dual fuel energy bill. This currently comes to £1,720, of which £840 goes towards the cost of the electricity used.
Electricity currently costs about four times as much as gas for the same amount of energy in the UK – giving the country one of the highest electricity prices in Europe.
And the gap between the electricity and gas price in the UK is the highest in Europe – largely because about four fifths of the levies sit on electricity bills, with the other fifth added to gas bills.
Here are some ways the CCC suggests bills could be cut.
Cut cost of heat pumps and EVs
The high electricity price and much lower gas price act as a disincentive to buy a heat pump – which runs on electricity – and encourages people to stick with their gas central heating, the Climate Change Committee argues.
It also makes electric vehicles less attractive, compared with petrol cars, than they would otherwise be.
“Electricity prices are too high, both because of our reliance on volatile international gas markets, and because of levies that distort the price of electricity,” Professor Piers Forster, interim chair of the CCC told The i Paper.
“This is slowing down the uptake of low-carbon tech such as electric cars and heat pumps, and putting the UK’s climate targets at risk.
“Making electricity cheaper by removing policy costs will speed up the uptake of clean electric technologies such as heat pumps and electric vehicles, and will help people feel the benefits of the transition such as lower bills and cleaner air.”
The CCC says it is up to the Government to decide how else to raise the money needed to fund the levies – but advocates of the move most commonly suggest it could be put onto gas bills instead, or put into general taxation.
“Moving levies away from electricity is absolutely critical if we want to transition away from burning fossil fuels,” Jan Rosenow, an Oxford University academic who has advised Ofgem, the International Energy Agency and the European Commission, told The i Paper.
“Having the highest electricity prices compared to gas in Europe disincentivises households and businesses to adopt clean energy technologies such as heat pumps. Myself and many others have for a long time pointed this out.
“The most effective way to incentivise electrification is to more fairly share policy costs and levies between different fuels. Our research shows that putting at least some of the levies on gas bills will have a bigger effect than just moving policy costs off electricity into the public budget.”
The CCC said the Government deserved credit for taking steps that will help put the country on the path to net-zero emissions – in particular by removing planning barriers to onshore windfarm development in England, driving through large solar farm developments, and reinstating the 2030 phase-out date for new petrol and diesel vehicles.
Read Next: Heat pump grants of up to £7,500 to be extended until 2030
The Government will also extend grants of up to £7,500 to get a heat pump until 2030 after Ed Miliband secured £13.2bn of funding from the Treasury.
The subsidy for people wishing to switch from a gas boiler is also expected to cover a greater variety of heat pumps, giving consumers more choice of green heating options, The i Paper revealed on Tuesday.
But the CCC expressed concern that “there has been no progress” on cutting household electricity bills.
“Our highest-priority recommendation is to remove policy costs from electricity prices. This will support industrial electrification and ensure the underlying lower running costs of heat pumps compared to fossil fuel boilers are reflected in household bills,” the report said.
Bring UK in line with rest of Europe
The CCC’s analysis shows that doing this could reduce the price ratio of domestic electricity to gas from around 4:1 currently, to between 2:1 and 3:1.
This would bring the UK price ratio into the range of other countries, such as Ireland and France, which are ahead on heat-pump rollout, and ensure that households installing a pump would see savings from its greater efficiency.
“The Government has committed to consulting on this, but without any timetable. It should set out its preferred option and consult on it urgently,” the report said.
Energy Secretary Ed Miliband said: “This Government has delivered the most significant investment in clean homegrown power in history… making planning decisions [for renewable energy] equivalent to powering two million homes, setting up publicly owned great British Energy, sparking a new golden age of nuclear power, and bringing in new plans to upgrade millions of homes to cut bills for homeowners and renters.
“We will continue to work tirelessly to deliver clean power for families and businesses.
The Government is understood to be exploring a range of options for rebalancing gas and electricity prices and we will set out further details in due course. No decisions have yet been made.
2025-06-25T05:13:48ZHow can the UK hit its climate targets?
Here are the Climate Change Committee’s top recommendations:
- Make electricity cheaper;
- Provide confidence and certainty to scale heat pump deployment in existing buildings;
- Implement regulations to ensure that new homes are not connected to the gas grid;
- Introduce a comprehensive programme to decarbonise public -ector buildings;
- Accelerate the electrification of industrial heat;
- Effectively deliver rapid expansion of the low-carbon electricity system;
- Put policies and incentives in place to ramp up tree-planting and peatland restoration;
- Develop policy to ensure the aviation industry takes responsibility for its emissions reaching net zero by 2050;
- Publish a strategy to support skills.
