Previous posts have addressed some of the myths currently being aired on wholesale prices. This week we look at UK energy prices in a global context and the real root causes behind the depth of the affordability issue in this country.
At the moment the global demand for energy is outstripping supply. Economies are growing but oil and gas reserves are finite. Climate change is forcing us to look at low carbon sources which require greater investment than harnessing traditional fossil fuels.
Recent figures from the International Energy Agency show that since 2000 natural gas import prices have broadly doubled for such countries as Belgium, Japan, Germany and Spain. Only the USA, with its huge gas reserves, has been immune from this global trend.
So are British households paying more than other countries for their energy? Not so, according to Europe’s Energy Portal, the EU body that monitors prices across the region. Their findings indicate energy costs per unit are cheaper here than say, Germany, Spain or Denmark.
The table below looks at what households pay across Europe for their gas and electricity, per kilowatt of energy.
A household’s energy cost is calculated through natural gas and electricity, and on this calculation Denmark pays the most for its energy in Europe. The rate, as calculated in May this year by Europe's Energy Portal, is as follows:
Electricity households
Denmark pays € 0.295 per kilowatt of electricity
Germany pays €0.265
Italy pays €0.231
Ireland pays €0.225
Spain pays €0.189
UK pays €0.170
Natural gas households
Denmarkpays €0.108
Italy pays €0.079
Germany pays €0.061
Spain pays €0.061
Ireland pays €0.058
UK pays €0.044
But of course there is a distinction to be made here between prices and bills. How we consume energy will have a big impact on the bills we end up paying. Too many of us live in old and draughty houses, which combined with the UK’s cold winters, pushes up bills.
Research from the Department of Energy and Climate Change (DECC), shows that the issue of energy affordability is not new, when viewed over a longer time horizon.
In 1970 an average household spent 6% of their income on energy bills, in comparison to 4% in 2011.
In their analysis of heating, habits and bills, DECC identify our inefficient homes as a key factor. DECC stresses the need for an "unparalleled improvement in energy efficiency" which would have a big impact on fuel bills.
There are 26 million dwellings in England, Scotland and Wales, but only 180,000 new homes are built each year and far fewer homes are demolished. Britain's housing stock has changed very slowly.
So when it comes to looking at root causes of fuel poverty we need to look beyond cost factors alone. A recent report commissioned by the fuel poverty campaign group Energy Bill Revolution examines why fuel poverty is such an issue for the UK.
It argues Britain is blessed with comparatively low gas and electricity prices and an average household income comparable to Sweden. The report concludes fuel poverty can be broadly explained, “by the relative inefficiency and poor state of repair of the [UK] housing stock.”
Sweden has some of Europe’s highest energy prices but the quality of its housing stock reduces the cost of bills, and hence brings down its levels of fuel poverty.
The debate about fuel costs will, no doubt, continue this winter but even in the short term there are money saving measures available which can help. For example replacing an old boiler with an A-rated high efficiency condensing boiler could save you over £300 a year.
On a more practical level DIY draught proofing of windows, doors and blocking cracks in floors and skirting boards could save £55 a year. Likewise switching off appliances left on standby could save a typical household between £50 and £90 a year.
Our customer service teams are happy to help with any energy efficiency questions and can be reached on 0800 980 8831 or see www.sse.co.uk