Domestic energy demand – an outlook for winter 2023/24

Blog 24 November, 2023

Parliament has seen the first speech of King Charles III. You might be forgiven for wondering why His Majesty’s Government have no plans, in the coming winter period or beyond, to address the challenge of energy demand reduction.

Instead, we heard plans for an Offshore Petroleum Licensing Bill. Whilst clearly described as being about energy security, the relationship between North Sea oil and gas licencing, and increased UK energy security, is tenuous.

We also heard plans for a Renter’s Reform Bill. One element of this is to scrap proposals to require landlords to meet Energy Performance Certificate (EPC) C from 2025. So the intent is clear, that the Government will reduce legislation that could have led to energy efficiency improvements and associated reductions in energy demand.

Support for consumers experiencing high energy prices

Consumer bills are affected by the unit price of energy, and the amount of units used. During the cost of living crisis and recent period of high prices, the Government had focused on supporting the consumers with the unit price of energy. OFGEM’s mechanism for ensuring consumers pay a fair price for their energy is through the price cap, which recently rose dramatically for gas and electricity customers. As of 1st October 2023, the price cap has reduced to £1,834. This is still significantly above pre-COVID levels and will increase again, by £94, in the next price cap period beginning 1st January 2024. Current ‘typical’ household energy bills are about £800 higher per year than they were in summer of 2021.

Lowering the National Insurance rate from 12% to 10% (autumn budget statement) will save £450 per year for an average earner, a saving more than negated by high energy prices. The autumn budget statement also refers to new electricity grid infrastructure, to support electrification and decarbonisation, although these have a mere £15-25 average energy bill saving by 2035. There are plans for expanding VAT relief on installation of some energy-saving materials, although the budget statement is light on details.

What might be the consequence of inaction on energy demand reduction?

National Energy Action estimates that across the UK, 6.3 million households are in fuel poverty. The Government’s recent report on fuel poverty statistics showed rates of fuel poverty in England at 13.4% of households in 2022, up from 13.1% in 2021, and expected to rise to 14.4% in 2023. Fuel poverty across the UK is increasing. The cost to the NHS of treating illnesses associated with damp living conditions is estimated at £2.5bn per year (2019).

Inaction on energy demand reduction risks lives and makes it far more difficult for the Government to achieve its legally binding targets on achieving net zero greenhouse gas emissions by 2050, and associated international commitments under the Paris Agreement.

Shedding light on the energy demand challenge, the Energy Demand Research Centre (EDRC) brings researchers together across five themes of Equity, Flexibility, Futures, Governance, and Place. Our research addresses key questions such as how to get a social mandate for lower energy demand futures, what place-specific action is needed in different parts of the UK, and what future jobs and skills are needed to deliver lower energy demand measures.

We believe that lower levels of energy demand can deliver improved quality of our lives, through new technologies and societal changes. Lower overall energy demand can make the UK a more productive, cleaner, healthier, fairer and happier place to live.