what affects our energy bills?
- Recent increases in energy bills have been driven by rising international prices for fossil fuels, particularly gas, not energy and climate change policies
- Energy bills are likely to continue on an upward trend over time, with or without policies, as a result of rising fossil fuel prices and network costs.
- DECC policies – designed to deliver low-carbon, secure and affordable energy supplies, help households and businesses save energy and to support low income and vulnerable consumers – will have an impact on energy consumers across the UK.
- The impact on households and businesses will be through changes in prices for goods and services and changing patterns of consumption, in particular for energy.
- If fossil fuel prices rise faster and further than DECC’s central projection, the impact of policies (such as the EMR) on businesses will be reduced (and the benefits for households increased) as Government policies help to shield energy consumers from rising fossil fuel prices. However, if fossil fuel prices fall, then the benefits of policies would be less and the costs greater.
- Global fossil fuel prices (particularly gas prices) are the main drivers of retail energy prices in the UK (and elsewhere) and if, as expected, they continue to rise over the coming years, energy bills will likely continue on an upward trend with or without policies. Were the UK to do nothing, our energy supplies would become much more dependent on imports, more vulnerable to volatility in global fossil fuel prices, and there would be a far higher chance of costly and disruptive blackouts.
- Policies which help decarbonise the UK’s energy supplies (such as the Renewables Obligation (RO)) will reduce the vulnerability of UK energy prices to movements in fossil fuel prices but will add costs to retail prices in the short- to medium-term.
Infographic:
Estimate impact of energy and climate change policies for Households, Medium-sized Businesses and Energy Intensive Users in 2010, 2020, and 2030.
