THE UK's largest energy supplier has said the upcoming rise in household bills shows the “urgent” need to reform the energy market and make greater use of cheap renewable power.
Household energy bills are set to rise to a three-year high this winter after regulator Ofgem announced on Wednesday morning that its energy price cap will increase by 4%.
The cap will rise by £60 a year – around £5 a month – to £1723 for the average household using both electricity and gas if that level was sustained for a year.
Greg Jackson, CEO and founder of Octopus Energy, told The National that Britain's continued exposure to global gas prices was keeping bills high despite the country's renewable energy resources.
He said: “The government’s decision to take VAT off electricity and remove some of the levies from bills has helped soften the blow this winter, but bills are still too high.
“Britain remains far too exposed to volatile global gas prices. The wars in Ukraine and Iran have created an unprecedented double crisis, with gas prices more than doubling since the start of the year.
“We urgently need to reform the market, make better use of our wind, and let people benefit from cheaper prices when green energy is abundant.”
Octopus Energy has been vocal in urging ministers to reform the electricity market through the introduction of zonal pricing.
Zonal pricing would split the UK up into several different geographical zones, with each having a different price based on its level of supply and demand.
Energy consumers would pay less for electricity if they are based close to electricity projects but more if they are based further away, meaning Scotland – with its abundance of renewables – would benefit enormously.
The company has previously argued that such a system could see Scots benefit from some of the lowest electricity prices in Europe because of Scotland's abundant renewable energy generation.
However, the UK Government has said it will not split the country's energy market into regions if doing so would result in higher bills for consumers in some parts of the country.
Octopus has also pointed to the electrification of household heating as another way to reduce reliance on volatile global fossil fuel markets.
Rebecca Dibb-Simkin, chief product and marketing officer at Octopus, recently said demand for heat pumps was surging.
She said: “The heat pump revolution is accelerating.
“We’ve never seen demand like this – thousands more households choosing to go electric to save money and insulate themselves from global price shocks.”
The independent Climate Change Committee has said households could save hundreds of pounds a year by “electrifying”, including by switching to technologies such as heat pumps and electric vehicles.
However, the committee recently warned that the country is not electrifying quickly enough for households to realise the potential savings.
It has called for a faster transition to clean technology, arguing it would also reduce emissions and leave households less exposed to fossil fuel price shocks caused by international conflicts.
Ofgem said the latest increase in its price cap was primarily driven by higher wholesale gas prices amid the ongoing conflict in the Middle East.
Neil Kenward, Ofgem’s director general for markets, said: “High international gas prices are continuing to drive energy costs in the UK.
“We welcome the Government’s intervention to remove VAT from electricity bills, without which customers would have faced even higher costs this winter.”
