REA warns government measures to tackle energy price hike “not enough”

The UK Government’s support measures to ease upfront energy costs to consumers and support energy providers is not enough to cover the dramatic price rises, the Association for Renewable Energy and Clean Technology (REA) has warned.

On 3 February, energy regulator Ofgem announced the energy price cap would increase by £693 (€827) per year – a 54% increase – affecting some 22 million households. This is largely due to a huge increase in wholesale gas prices. A further increase of £400 (€477) is expected after the next cap is set in six months’ time.

In response, the government launched a package of measures designed to ease the pressure on consumers. Chancellor Rishi Sunak announced a plan to provide £350 (€417) in support, including £200 off energy bills (to be repaid over five years) from next year, and a £150 (€179) council tax discount.

The government also announced an expansion of the Warm Homes Discount, advocated by the REA. However, the Association has warned that on their own, the measures, even when combined with the council tax discount, will cover just half of the price cap rise.

Last month, the REA published a six-point plan to tackle the energy crisis. The plan included measures to mitigate energy bill rises by: moving ‘green’ levies to general taxation; suspending VAT on energy bills for a year; expanding the eligibility and increase the value of the Warm Homes Discount, and introducing a Commercial Loan Scheme.

However, in parallel, the REA strongly urged the government to provide catalysts to improve home insulation and drive up the installation of domestic renewables and clean technology to reduce the threat posed by volatile gas prices. This can be achieved by establishing an effective insulation scheme by the spring to ensure all homes are at EPC rating C by at least 2024/25, and to remove VAT on domestic renewables and clean technology.

The Association also reiterated the need to accelerate the wider energy transition to tackle the energy price crisis. The procurement of new renewables capacity via six-monthly contract for difference auctions and a three-year rolling time frame of future auction dates and allocated budget, starting in the summer, is one such policy the REA has been advocating for.

“The government’s package of measures will bring an element of respite to both households and energy suppliers, and covers some of the measures we have been calling for,” said Dr Nina Skorupska CBE, chief executive of the REA.

“However, these policies alone will not cover the expected energy bill increases and don’t address a fundamental reality – as long as households are at the mercy of volatile fossil fuel prices, we will continue to see people struggle to pay the bills.

“That is why the government must address the scale of the problem by providing catalysts to improve the insulation of homes and to drive up the installation of domestic renewables and clean technology.

“If the government does not accelerate the energy transition, the cost of living crisis will get more severe, and harder and more expensive to fix.”

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