Households, which switch to electric vehicles (EVs) and heat pumps, could be up to £1,600 a year better off when October’s price cap hike comes into force, according to new analysis from the Energy and Climate Intelligence Unit (ECIU).
The think tank said what it dubs “electric households” are already seeing average savings in running costs of £1,180 per year when compared to those reliant on petrol cars and gas boilers.
ECIU found more than a third of May’s inflation rate of 9.1%, the highest for 40 years, was accounted for by increased energy prices. However, the inflation contribution from energy was only 2.3% for households that use electricity to power a heat pump and electric car, compared 3.3% for households that use fossil fuels.
It said that gas price inflation is almost double that of electricity currently, meaning that heating an energy efficient home with a heat pump is now more than £220 cheaper per year than heating an average home with a gas boiler.
On top of that, petrol price inflation of 30% means that EVs charged at home were £780 a year cheaper to run than internal combustion engine vehicles at the end of May.
This had grown to £960 a year by late June, taking overall savings to £1,180 a year for an electric home with net zero technologies.
With petrol prices still rising and gas and energy bills set to increase again when the October price cap is introduced, the gap in energy costs between fossil fuel dependent and fully electric homes could grow to around £1,600 a year, the ECIU estimated.
Upgrading all homes to Energy Performance Certificate Band C and installing heat pumps would yield annual cost savings of more than £4 billion under current gas prices across the UK, rising to £10 billion under forecasts for October’s price cap, it added.
Commenting on the findings, Bim Afolami MP, chair of the Parliamentary Renewable and Sustainable Energy Group (PRASEG), said: “There is no category in which inflation is hitting homes and businesses harder than in the cost of energy. The UK’s wind power generation had already begun to replace our dependence on gas, the high price of which has had a huge impact on energy bills for homes and businesses. The route to cost effective and efficient energy from domestic renewable sources is through expanding home insulation and heat pump installation.
“Recent months have also seen petrol and diesel prices soar at forecourts across the UK and beyond. Charging electric vehicles will be both cheaper and cleaner as wind power continues to grow from strength to strength. It is excellent to see the second-hand market for EVs surge to provide families with more affordable options to shift gear and drive electric.”