The innovation charity, Nesta, has welcomed the UK Government’s proposed Energy Price Guarantee to cap energy costs for UK households in light of soaring wholesale gas prices, while highlighting the need for a plan to reduce gas demand.

Nesta estimates that the Energy Price Guarantee will cost taxpayers £23 billion over the next six months alone.

Madeleine Gabriel, Director of Sustainable Future at Nesta, said:

“A clear plan to reduce gas demand is missing in action from the Government’s announcement today.

“As people breathe a sigh of relief over much-needed Government support for energy costs this winter, the threat remains of people being locked into a huge tax bill year on year. Capping bills is a necessary step to deal with the emergency situation many people are facing, including three quarters of parents worried about paying gas and electricity bills. But while it is right people have some certainty for now, open-ended subsidies cannot be relied on in the long run.

“The Government subsidy will be paid by taxpayers for at least two years and may remain as long as gas prices stay high, so a strategy for reducing gas use in homes is now crucial. Fracking and new gas extraction fly in the face of the UK’s net zero goals and won’t be enough to make any real progress lowering the subsidy.

“UK households could save £3.3 billion on bills if the Government works to reduce household gas use by 10% over the next six months, with the Government also saving a further £2.3 billion. Reducing demand by 10% in six months and 20% over the next year is achievable through low- and no-cost energy efficiency measures, like insulation, smart thermostats and helping people adjust their boiler settings.”

Nesta estimates a 10% reduction in household gas use can be achieved in the next few months through a combination of simple actions such as:

• turning down the flow temperature of boilers, which can reduce gas use by up to 8%;
• using smart thermostats like Nest, which can cut gas use by 4.5-5%;
• turning off preheat settings on combination boilers, which can cut gas use by up to 3%.

Ends

Notes to editors

1. Nesta estimates that the Energy Price Guarantee will cost HM Treasury £23 billion over the next 6 months. This is based on the difference between the new £2,500 cap of the Energy Price Guarantee and Ofgem’s default tariff cap over the next 6 months, using the level announced for October to December and Cornwall Insight’s projected default tariff cap for January to March. This assumes unit prices per kWh are capped at £0.10 and £0.39 respectively under the new scheme, which would put average annual bills at around £2,500. The cost to suppliers, subsidised by government, is in line with unit prices under Ofgem’s October to December default tariff cap (15p/52p per kWh) and Cornwall Insight’s projected default tariff cap for January to March (28p/70p per kWh).
2. Using the above assumptions, Nesta estimates that £3.3 billion could be saved on household bills and £2.3 billion saved by HM Treasury in the six months from October 2022 to March 2023 if 29 million households reduced average gas and electricity demand by 10%.
3. The Heating and Hotwater Industry Council estimates that households could save 6-8% on the average annual gas bill by lowering the flow temperature of their boiler from 70°C to 50°C. Nesta is currently updating these estimates by commissioning testing in Salford University’s Energy House, with results due shortly.
4. Based on trials, the Behavioural Insights Team (BIT) estimated in 2017 that the Nest Learning Thermostat can save approximately 4.5-5% of total annual household gas consumption.
5. Nesta estimates that turning off preheat settings on combination boilers can cut gas use by up to 3% based on findings from the UCL Energy Institute’s research in 2019.
6. For more information on the analysis or to speak to one of the experts involved, please contact Kieran Lowe, Media Manager, on 020 7438 2576 or [email protected]. Spokespeople are available for broadcast interviews.

About Nesta

We are Nesta, the UK's innovation agency for social good. We design, test and scale solutions to society's biggest problems. Our three missions are to give every child a fair start, help people live healthy lives, and create a sustainable future where the economy works for both people and the planet.

For over 20 years, we have worked to support, encourage and inspire innovation. We work in three roles: as an innovation partner working with frontline organisations to design and test new solutions, as a venture builder supporting new and early stage businesses, and as a system shaper creating the conditions for innovation.

Harnessing the rigour of science and the creativity of design, we work relentlessly to change millions of lives for the better. Find out more at nesta.org.uk