How different households use energy and how much it costs them
www.nesta.org.uk/how-different-households-use-energy/
www.nesta.org.uk/how-different-households-use-energy/
This explainer looks into the differences in the way we consume energy, what drives those differences and outlines why understanding them is essential for designing fair policies.
In 2023, a quarter of the UK’s total energy consumption was spent in our homes. Most of this was used for heating and hot water (80%), followed by appliances (15%) and then lighting and cooking (6%).
In total, British homes spent £57.6bn on energy in 2023. Last year, UK households collectively paid £30.8bn for electricity and £24.9bn for gas – even though they used far more of the latter. Over that period, they used approximately 93,000 gigawatt hours (GWh) of electricity, but 237,000 GWh of natural gas, as well as 45,000 GWh of other fuels, such as oil, wood, etc.
Household energy consumption by end use
Pie chart showing the proportion of total household energy consumption for different purposes (heating, water etc.) as described in the text.
Changes to energy bills are often explained in terms of a “typical” household. While this can be useful when trying to give a quick, easily understood snapshot of a situation, we know that, in reality, there’s no such thing.
Energy costs are not evenly divided among the UK’s 28 million households and how much energy they use and how much they pay varies significantly.
This depends on two elements – the type of home and the profile of the people who live in it.
Differences in energy consumption mean that changes in gas and electricity prices can affect households very differently depending on their specific needs and circumstances. Understanding those differences will be crucial to ensuring that the transition to clean heat will be fair for everyone, especially the least advantaged.
Since most energy is used for heating, a household’s heating requirements and the fuel and heating technology they use will largely determine how much they spend on energy.
The vast majority (84%) of British homes are currently heated by natural gas and use electricity mainly for lighting and other appliances, with a smaller proportion heated by electricity (8%) or oil, LPG (liquefied petroleum gas), wood or coal (6%). A small fraction are connected to communal heating (2%).
Homes heated by natural gas will usually have a gas bill that is similar to their electricity bill even though they consume many more units of gas than electricity. This is because electricity prices are much higher relative to gas prices.
Electrically heated homes are much more exposed to the high costs of electricity because they typically rely on direct electrical heating (such as panel heaters) which is very inefficient. As a result, these households face a greater rate and, increased severity of, fuel poverty compared to those with gas heating.
However, there is a small subset of electrically heated homes that do have lower total energy bills – those with heat pumps (less than 2% of all homes).
It will be no surprise that bigger homes typically need more heat. The size of a property is the biggest factor affecting energy bills because heating costs add up quickly.
A large, five-bedroom detached house might need 2.5 times more energy for heating than a two-bedroom flat, assuming similar levels of insulation and similar heating patterns.
In a gas-heated household, electricity consumption is a little less affected by size because the number of appliances varies less. Adding electricity to gas, a total bill can still be around twice the size of a larger home.
The age of a property plays a big role too, as newer homes tend to have better insulation and so use less energy.
Even two households living in an identical home won’t necessarily have the same energy bill.
People who spend most of their time at home require more energy for heating when compared with those who are employed. This includes pensioners, families with young children, those working full-time from home, or people with disabilities and their carers.
The number of people in a household is another big factor. While some households can be large, some homes can be under-occupied, for example, single pensioners in larger owned houses. Though they may have a proportionately small electricity consumption, they cannot reduce their gas (or other fuel) spending to the level of someone living alone in a smaller property.
Finally, different lifestyles also affect energy use. Sometimes this is due to personal choice, people have different comfort preferences and set their thermostats to different temperatures. But for some, this is due to necessity, such as households with health needs who may need a lot of electricity because they are running energy-intensive medical equipment.
This chart illustrates the bills of four different hypothetical households, two using both gas and electricity and two relying on electricity only:
Annual energy bills of different types of household
Bar chart comparing annual gas and electricity bills for different household types. A single-person household in a flat with direct electrical heating pays £1,400 (electricity only). A couple in modern flats with electrical heating pays £1,300. A 2-bedroom terraced house with gas heating pays £1,800 (£1,000 electricity, £800 gas). A large family in a detached house pays £2,500 (£1,300 electricity, £1,200 gas).
Despite all the variation we have discussed so far, it can be useful to be able to group households based on common characteristics. This can help us understand how different energy policies or social support might affect different types of households.
The UK’s energy regulator Ofgem has developed 24 consumer archetypes that represent the range of household types living in British homes.
The population is sorted into these archetypes based on a mix of factors that affect energy use, including important information about households’ circumstances.
For example, the archetypes are split by income. This matters because the same energy bill (eg £2,000) means something very different to low earners of £20,000 compared to someone with an income of £50,000.
The chart below shows how many units of electricity each archetype uses. Archetypes with zero gas use are off the gas grid. Hover over bars to see more information about each archetype.
Energy consumption of Ofgem consumer archetypes
Bar chart comparing annual electricity and gas consumption across Ofgem consumer archetypes. Electricity consumption ranges from 2,482 kWh (D11) to 7,523 kWh (J24), while gas consumption ranges from 8,782 kWh (D11) to 18,530 kWh (I22), and zero for some archetypes. Archetypes are grouped by income decile (A lowest, J highest).
This understanding is especially important for supporting fuel-poor households, defined as those who spend a large portion of their income on energy.
Existing schemes (Warm Homes Discount, Cold Weather Payments and Winter Fuel Payments) try to target support by testing for high energy expenditure and low income.
These schemes give a flat rebate to people who qualify. This means, however, that they provide a much smaller relative benefit to larger households (compared with smaller ones) or to people living in homes with very low energy efficiency (compared with those living in better-insulated properties).
An alternative approach would be to tier support based on energy needs or to provide a reduced rate for eligible households.
The way households use energy is expected to change drastically over the next 15 years as the country goes through the green transition.
Millions of households will need to transition from gas or oil boilers to low-carbon electric-powered heating such as heat pumps. More widespread use of electric cars (EVs) will also contribute to higher electricity consumption.
As a result, the difference in energy bills between homes with gas boilers and homes with low-carbon heating could become significant.
Depending on how prices evolve, households using electrical heating could see higher bills in the short term but save money in the long term. Even though wholesale prices are hard to predict and outside of their direct control, the government and Ofgem can significantly influence the prices households pay through measures such as setting network cost caps, reallocating policy levies, and targeting energy bill support.
By considering energy consumption profiles, policymakers can make sure that the electricity transition ahead of us is planned, fair and doesn’t leave people behind.
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