The Energy Price Hike and Fuel Poverty

It is clear that fuel poverty – wherein keeping our homes at a reasonable temperature becomes an unmanageable financial burden – is on the rise as we head into a winter expected to see many more challenges, including the resurgence of Covid-19 and the flu, the financial ramifications of the loss of the £20 Universal Credit boost amid the rising cost of basic supermarket necessities.

It seems an understatement to say that the outlook is incredibly worrying. More than a mere financial concern, the ability to keep our homes at a reasonable temperature is a health concern – something that we cannot be deprived of simply because we exist at the bottom rung of a long and volatile chain of supply and demand.

What Has Happened So Far?

The 1^st of October this year saw the national energy price cap rise to £1,277 a year – something that happened concurrently with the collapse of nine energy suppliers. The independent regulator has since stated that the government must actively work to build a more resilient energy market within the UK but, for now, the price of ill-preparation and a decided lack of buoyancy is falling on the shoulders of the country’s homes and businesses.

Issues are being felt far beyond the UK, signalling that the energy price hikes are a long-term and widespread issue with no simple solution, or definitive end in sight. For now, the country – and many other countries across Europe, Asia and the Americas – remain at the mercy of the rising price of gas and coal.

Why Are Energy Prices Rising?

There is no single reason behind the price hike. Instead, it’s a combination of constraints and supply issues that are currently taking place on a global scale, making it all the more difficult to stabilize the market and ensure a swift improvement for households within the UK and far beyond.

Blackouts in China are growing increasingly frequent, while India’s coal shortage is anticipated to reach a crisis point in a matter of days. Similarly bleak warnings have been issued for the UK, with the risk of blackouts this winter causing worrying comparisons with the Winter of Discontent between 1978 and 1979.

The primary driving force behind the UK’s issues stems from the extraordinarily high price of natural gas, which has proven unmanageable for energy companies that set tariffs against a much, much lower wholesale price. Already, close to 2 million households have been forced to switch energy supplier. For those who are able to stay put, a sharp rise to the energy price cap is anticipated in just over five months’ time.

At this point in time, the sheer scope of warnings being issued for the winter mean that the impending crisis may not be garnering the recognition it needs.

Who is Affected?

At this point in time, the primary casualties are businesses. Beyond the smaller energy companies already forced to close the lack of protection commercial premises have against rising gas prices mean that they are already feeling the ramifications of this global issue, far more acutely than the average UK household.

Richard Walker, managing director of Iceland, has already stated that the firm’s energy bill will increase by around £20 million in 2022, and that price hikes in-store were inevitable as a result. A similarly stark warning has been issued by Tesco charman John Allan, who anticipates a rise of around 5% as a result of ongoing issues with labour, inflation and, of course, energy prices.

Already, then, it is clear to see that the impact will grow significant long before the energy price cap is lifted in April 2022.

Households across Northern Ireland are already experiencing the financial burden of this crisis. In Britain, low income households will be the first to feel the effects of this change – and in more ways than one. Fuel poverty is just one side of the story – but one that we cannot ignore.

So far, the government has remained committed to the notion that the country will not see blackouts as it did in the late seventies – but, as of the time of writing, neither have they stepped in to prevent energy prices from being transferred onto customers.

What is Fuel Poverty?

Fuel poverty is not a new concept – and, unfortunately, for many UK households it is not a new prospect, but a reality. The inability to afford to heat and light our homes is a risk that cannot be overstated. During the colder months, the cold poses a particular risk to the very young and the very old; it can exacerbate existing health conditions like asthma and heart disease, and cause its own issues due to rising damp and mould within unheated homes.

This comes at a time when 60,000 wintertime deaths are anticipated as a result of the flu, and acts as confirmation of the sad truth that the end of 2021 does not signal an end to the extreme difficulties faced by billions of people over the last two years. Instead, it signals the beginning of a new catastrophe.

The charity National Energy Action has already warned that 1.2 – 1.5 million people will be plunged into fuel poverty, but recently reported that Octobers price increase has seen 500,000 households into fuel poverty already. The problem specifically targets the most basic necessities any human needs to survive, and makes clear the impossible choice so many will face between food and heat.

What Can We Do in the Short-Term?

At present, households are still protected by the new energy price cap introduced at the beginning of October. While energy prices have increased, they are not yet at the unprecedented level anticipated for the spring of 2022. Ofgem and Which? both recommend customers revisit their existing energy tariff, although, already, the most competitive rates have been removed from the market.

If your supplier collapses, then Ofgem will automatically move you over to a new supplier without any loss of power to your home.

Unfortunately, this energy crisis is playing out on a global level, meaning that there is nothing the average UK household can do to mitigate the volatility of the wholesale gas market. Worse still is the fact that these problems have no definitive end date – April 2022 remains the focus point for now but, as it stands, yet another amendment will be made to the UK’s price cap six months later in October. With the entire world looking to get back on its feet and ensure an unwavering, affordable supply of energy to countless households, the road to stability looks long.

In the long-term, then, the only way to emancipate ourselves from the chaos is to continue to embrace alternatives to fossil fuels wherever possible. This energy crisis is yet another example of our country’s disastrous reliance on non-renewable energy sources, and quite how far-reaching the implications are for our health, wellbeing, safety and, more generally, ability to go on with life as we have always known it.

What Can We Do in the Long-Term?

Opting instead to make a long-term investment into powering your home with a clean and free source of energy is, of course, the only way to create that division between your finances, and the global fossil fuel market. Utilising solar PV technology to power your home means stability throughout driver and labour shortages, inflation, rising price caps, volatile markets, disruptions to transport, and energy supplier collapses.

For many, the question is often, ‘How long will it take me to pay off solar panels?’, and the mere fact that it is impossible to put a number on it – to anticipate quite how long energy bills will be allowed to continue rising, and how sharply they will do so over the coming months and years – is testament to quite how important self-sufficiency is in this arena.

The UK is still many, many years away from achieving its net zero target, meaning that the average UK household will continue to be governed by one of the most erratic wholesale markets in the world.

Some of the costs will be impossible to mitigate, such as rising supermarket food bills, but ensuring that we are always able to heat and light our homes with a free energy source is one of the biggest steps we can take toward a safer, healthier, and more stable future.