With winter storms history, and balmy summer days lying ahead, now is a good time to reflect on the average UK home and why Britons continue to suffer from high energy bills and seasonal discomfort — Scandinavia and other European countries face severe weather with few problems. Jon Herbert looks at the commercial implications.
Where would we be without poor weather — and high energy costs — to grumble about? A large part of the answer lies in the historic nature of many British homes, especially the “leaky” Victorian and Edwardian dwellings that make energy efficiency so difficult and leave us vulnerable to bad weather.
While the so-called “big six” energy companies — British Gas, Npower, SSE, Scottish Power, E.On and EDF — face inquiries into the pricing of the 95% of gas and electricity they jointly supply to UK homes, an inconvenient reality is that we waste a lot of energy. This is a substantial sustainable business opportunity. However, it also means that possibly the most powerful of renewable fuels — energy efficiency — is not well suited to the average British housing stock. More ingenuity is required.
Plugging the gaps
Comparative figures show that UK energy costs actually stack up quite well against other nations. Poor energy use is the real problem. This was recently uppermost in the mind of Energy Secretary Ed Davey, when he spoke at the annual Ecobuild 2014 conference, now a globally recognised event for sustainable design, construction, energy and the built environment.
Following on from the launch of the Department of Energy & Climate Change (DECC) Energy Efficiency Deployment Office (EEDO) two years ago, designed as Mr Davey said at the time to “change the way we think about energy … to make energy efficiency real and relevant to people’s everyday lines,” the minister unveiled improvements to the Energy Companies Obligation (ECO). This is an energy efficiency programme introduced early in 2013 to replace the Carbon Emissions Reduction Target (CERT) and the Community Energy Saving Programme (CESP). ECO obligates larger energy suppliers to improve the energy efficiency of domestic users in conjunction with the Green Deal, which allows improvement costs to be paid for through normal energy bills. Mr Davey also announced improvements to the way in which the Green Deal will now operate. Proposed changes will reduce costs for suppliers and the impact of bills on consumers. However, the principle remains that to update the UK’s historic housing stock will be expensive and needs subsidy support.
Nevertheless, the vision shared by the Government and industry is to “build one of the least wasteful, most energy-efficient, most climate friendly societies in the developed world,” he said.
A radical change in the way that British households approach powering and heating their homes is needed, Mr Davey argued. Users must take control of their energy consumption and become smart savers. It is vital to cut waste wherever possible to reduce bills and “stay warm for less”, while also reducing domestic carbon emissions.
The challenge for business is to convince individual citizens that they can personally make a difference. An example, said Mr Davey, is the CEO of the Kingfisher Group, Sir Ian Cheshire’s “Big Energy Idea”. This foresees homeowners being able to earn money from their home’s ability to generate energy if smart technology is used to its full potential. Sir Ian has explained how a project to retrofit an old house with high-tech, energy-efficient products reduced energy use by 70%.
Progress has been made over 10 years, the minister added. The good news for companies is that the UK energy-efficiency market is now worth £18 billion and supports 130,000 jobs. There is also considerable export potential. Britain sells some £2 billion of energy-efficient products and services overseas, and is recognised as a world leader in technology and expertise.
On the plus side, two-thirds of lofts and cavity walls are now well-insulated. More than 750,000 homes have full double-glazing. Homes use roughly 20% less energy than in 2004 —this is saving consumers some £200 annually, albeit at current prices. However, from a business perspective, some 50% of homes do not have energy-saving condensation boilers. In addition, approximately 7.5 million have inadequate roof insulation, some 5 million are not fully double-glazed, and 1.5 million have no double-glazing at all. More than 5 million also need cavity wall insulation. Meanwhile, almost 8 million solid wall homes are untreated.
The poorest and most vulnerable people were at greatest risk, explained Mr Davey. Five million homes in the private rental sector have not been properly targeted or incentivised. Yet since the launch of the original Green Deal and ECO in 2013, more than 450,000 UK households have benefited from greater energy efficiency, and at least one million additional homes will also be upgraded in the present financial year. ECO is to be extended until 2017. There will also be a greater effort to convert Green Deal assessments into finance plans. The aim is to help households to buy less energy, but make their homes warmer, cheaper and greener.
By 2020, the Energy Secretary’s ambition is for every home and business in the UK to have full control of their own energy use through the use of smart electricity and smart gas meters. The key is to focus the mind of users on where and how energy consumption can be minimised, he believes.
What do homeowners pay?
Latest DECC estimates show that the average annual UK household dual-fuel cost for gas and electricity is circa £1264.
Although figures for Belgium, Italy and Sweden are not available, average 2013 UK domestic electricity prices, including taxes, were the fourth lowest among 15 EU countries. They were also the fourth highest among G7 nations. UK domestic gas prices in 2012 were the second lowest among the same 15 EU counties and the third lowest in the G7. US home-owners enjoyed the lowest gas and electricity prices.
Ofgem statistics from mid-September 2013 show that the average profit margin available to the “big six” suppliers was in the region of £65 on a total energy bill of £1315. This was £30 higher than in September 2011 and again in September 2012. However, figures are volatile. The largest element of bills is the cost of buying gas and electricity, either on the wholesale market, or directly from electricity generators or gas suppliers. A major chunk also goes on the costs of running a retail business with billing and sales.
About 16% goes on pipes and wires needed to distribute energy to Britain’s homes. Maintaining high-pressure gas transmission systems costs 2% of the bill. High-voltage lines account for 4%. Finally, 6% of gas bills and 11% of electricity bills goes on government energy-efficiency schemes.
However, to spread the risks of supply interruption, energy company traders buy at different prices across a timeframe of a day, a month, or even several years in advance to cover the possibility of, say, political unrest in key oil and gas producing regions.
What can be saved?
Size and type of housing, lifestyle choices and the willingness to assume energy-saving measures makes a difference. People with large houses can save more; small flats may see little benefit.
Yet small measures can make a substantial difference. Eight million people in the UK probably do not have a thermostat, which can save £65 annually. Turning off stand-by appliances can save up to £70, turning thermostats down by 1°C can save £65, and draught-proofing up to £90. Adults without children who come home at unpredictable times may potentially make the greater savings. In addition, hot water cylinder insulation can save up to £60 a year, eco shower heads up to £75, while replacing all traditional bulbs with energy-saving ones can mean a saving of £60 annually.
There is also a growing market in eco-housing. For the more venturous, homes made of straw bales, skimmed with lime mortar and insulated with sheep’s wool, are said to be both efficient and cosy. The people of Scandinavia have long seemed to cope with sub-Arctic weather conditions of -20°C quite readily through alternatives to bricks and mortar. The Viking use of metre-thick seaweed roofs, which can still be found in Denmark, has given way to well-insulated wooden structures.
This more modern tradition has been taken further to include the idea of the passive house, the zero-energy house, the body-heat house, and homes with no additional heating sources during winter months. All are beginning to make their appearance in Britain. Clearly, the UK still has some way to go in reforming the idea of the Englishman’s Castle.
Last updated on 07/05/2014
First published by Croner-i on 7 April 2014