So with Tina’s overall energy costs at zero, it seemed prudent to look ahead and project my energy costs over the next few years, especially as one of the big energy providers in the UK has just increased their prices by 8%, just in time for winter.
I have records of energy consumption and cost for the last 13 years, and combining the data for gas and electricity the average annual price rise has been 14% a year. This is not based on an average home or average supplier price rises, but on my actual energy bills. This means the price to some extent is dependent on me switching suppliers regularly to get the best deal, which is not always the case, as I have spent the last 2 years on a very green tariff, which is not the cheapest. In the graph below I have fixed my energy consumption at the 5 year average of a combined 19,765kWh, so that I can just compare the price. The graph shows the actual combined gas and electricity price I paid up until 2012, where there is a full year of data, and then from this point onwards the graph splits into 2 projections up to 2020. The lowest projection is based on an 8% increase each year, which is lower than my average. The second projection is for a 14% increase each year, which assumes that prices will rise at a similar rate to the last 13 years. Personally I see prices spiking at potentially higher amounts, but these scenarios are enough to demonstrate the issue.
With an annual increase of 8%, my energy bills will have nearly doubled by 2020, from £1,398 to £2,588. At an average 14% increase it nearly triples to £3,989. This means that I need to reduce my energy consumption by 65%, just to break even. I am certainly not predicting that my wages will increase at the same rate, so I need to take action to reduce my consumption.
The boss of SSE was interviewed about the recent price rise and was asked why costs are being passed on to customers rather than being absorbed by a drop in profits, at a time when many companies have had to take a hit on their profits. His response was that their profit was only 5%, which was 'fair'. What he failed to point out is that this is as much as the government take as tax. More to the point though is that the big six energy companies in the UK made a profit of £3.74 billion in 2012. If the energy prices double by 2020 and the energy companies are still taking a 5% profit they could be getting a staggering £7.5 billion a year.
It just goes to show how we can be hoodwinked. It means so much more to know the actual amount of money not just how much their share is. Do we think they deserve 5% of the profit? I mean have they run the companies wisely, by investing in renewables and new infrastructure? Hell no! OK, so they have done a very good job at keeping the lights on so far, but this winter we will be at the greatest risk of blackouts and shortages for many years, and that is through lack of investment and forward thinking over 10 to 15 years or more.
The energy companies are also digging their own graves though. As prices rise people reduce their consumption, either by investing in energy efficiency and renewables or by cutting back their energy usage to the bare basics out of necessity. So the increase in energy company profits will not be rising as significantly. In addition the cost of investing in new power stations or wind farms is rising, because of the increase in energy and resource costs, so there is no benefit to dragging your feet. On the same breath if they let the lights go out there are penalties and fees, on top of the lack of income whilst electricity isn’t flowing.
There is plenty of evidence to show that Tina really has the right idea. Super-insulate your house, to reduce your need for energy as much as you can. Make it the best that you can afford to, and look for cheap options if money is tight, such as thick curtains, window quilts, thick underlay underneath carpets and sealing up draughts. There is ECO funding available to help people who have uninsulated solid walls, and for those who are 'vulnerable' or on low income. The Green Deal can also provide a loan for some of the improvements, but this is a loan paid back through energy bills and bears interest. A good place to start is with the Energy Savings Trust.
Then consider renewable energy to reduce your exposure to buying energy and protect you from price spikes. Even if you get the solar PV installed for free and the installer gets the benefits of the Feed-In-Tariff payments (in the UK), you will still be reducing your electricity bill by using the free renewable energy during the day. Similarly the Renewable Heat Incentive will soon benefit a switch to biomass or solar hot water, by providing payments for the energy generated.
Be aware though that the insulation will protect you and keep you warm in a power cut, but solar PV panels will not in the UK, if you are grid connected. If renewable energy is still feeding into the grid there could be a danger to engineers working on power lines, so all grid-connected renewable energy automatically switches off in a powercut. If you are not grid-connected then you won’t receive the financial benefit of the FITs.
Plans on saving 65% or more of our energy consumption start today! I’ll keep you posted J