How much would an energy revolution save consumers?
- 21 Jan 2013, 18:00
- Robin Webster
How much would the average family save in energy bills if the
government instituted a nationwide programme to insulate the UK's
draughty homes? The front page of the Times claims today that the
average household could knock £310 a year off its energy spend. A
closer look indicates that it's getting the numbers confused.
Times is reporting on a letter written by an "unprecedented"
alliance of more than a hundred energy companies, charities and
businesses to David Cameron about the need for the government to do
more to tackle fuel poverty. The group, brought together under the
campaign umbrella of Energy
Revolution, are calling for the government to institute a
nationwide programme to fit the UK's homes with insulation and
prevent consumers having to pay for energy that is then wasted.
A saving of £310?
According to the Times article, the group argues that
"stagnating wages and soaring bills" could mean as many as 9
million homes could be affected by fuel poverty - that is when a
household has to spend more than ten per cent or more of its income
on fuel to heat the home - by 2016. The only way to tackle the
problem properly is to embark on a nationwide programme to fit
insulation to the UK's draft homes - a move, the Times says that
"would save the average families £310 a year on energy bills".
Is this right? The £310 figure is sourced to research
launched by the energy bill revolution campaign in
February of last year. Undertaken by the consultancy Camco (now Verco), the report
models what could happen if the government used revenue from carbon
taxes to subsidise home insulation.
In the first of three scenarios modelled in the report, all of
the available carbon tax revenue is committed to grants to insulate
homes for households in fuel poverty. The report finds:
"Across all fuel poor households, the
savings in energy bills would be on average about £310 per year
between now and 2027"
The projected savings for fuel poor households of devoting all
the money in the proposed scheme to them vary widely, from £218 a
year for a flat to £1,127 for a semi-detached house, across the
different households. The modelling is illustrated by the following
graph in the report:
But the statement made in the Times article - also followed up
Daily Mail - that energy insulation measures could save the
average household £310 a year is not correct because the figure
applies only to the quarter of households that are in fuel poverty,
rather than being an average figure for every household in the
Is the £310 figure an over-estimation?
As there are three times as many households in the country who
are not in fuel poverty than who are, it seems likely that £310 a
year - calculated by assuming that all the money generated would be
spent on fuel poor households - could be a significant
over-estimation of the savings possible for an average
A spokesperson for the Energy Bill Revolution argued that this
is not necessarily the case, because it is more difficult to reduce
the bills of homes in fuel poverty than other householders. This is
because while some households in fuel poverty choose to heat their
homes and struggle for other essentials instead, some just live in
cold homes - and when insulation measures are introduced, they
respond by turning the heating on.
This understandable response means that households in fuel
poverty who receive a grant to insulate their homes don't
necessarily end up with lower energy bills. Instead, they get
warmer homes. So it could be be less expensive to bring down the
energy bills of an 'average' household through insulation measures
than it is to bring down the bills of households in fuel poverty -
or at least, that's the argument.
Real savings possible?
So what's the real figure for average savings? Well, the
relevant research by the energy revolution campaign doesn't contain
a comparable figure. They have told us however that they will try
and calculate a figure - we will update this blog if and when they
It's worth pointing out that this is a rather academic exercise
in political terms. It would involve the government recycling all
of its revenues from the carbon-trading mechanisms the
Emissions Trading Scheme and the
Carbon Floor Price to insulating UK homes. This application of
funds from one revenue source to pay for something else is known as
'hypothecation' - and the Treasury are generally known not to be
that keen on it.
But the core point is that the £310 figure cited in the Times
and on the front page of the Daily Mail only applies to fuel poor
households - so it could well be an overestimate for the average
household. We will update if we get more information.