The energy price cap outlined by the Government will come into force next month and with October 1st rapidly approaching, we wanted to highlight the key takeaways from the Government’s plans.
First off, it’s important to understand that the cost of your energy bills WILL NOT be capped. The name of the scheme will lead many to believe that you will not pay more than £2,500 a year. This is not the case. The energy cap actually refers to both the standing and unit rate of gas and electricity. Ultimately, the more energy you use, the more your total charge will increase.
Why is the price of gas increasing faster than electricity?
The primary reason for the increase in both gas and electricity prices is the cost of wholesale gas. So why the increase in electricity? Good question. In a nutshell, the price of electricity is very much tied to the cost of gas due to gas being the primary fossil fuel used alongside renewable sources to generate electricity.
In terms of percentages, the increase cost of gas is near double that of electricity:
Gas
Daily standing charge = 28.49p
Unit rate = 10.30p per kWh
Increase of 40%
Electricity
Daily standing charge = 46.36p
Unit rate = 34.00p per kWh
Increase of 20%
The cost of running a heat pump
The cost of running a boiler
Is Now The Time To Switch AWAY FROM GAS To A Heat Pump?
The upcoming price difference between Gas and Electricity means that a heat pump only requires a seasonal coefficient of performance of 2.7 or more in order to save money against an average efficiency gas boiler. Typically the heat pumps we design will have a seasonal efficiency of 3.4 or higher, meaning customers can now save hundreds of pounds with a heat pump compared to a gas boiler.
Think of it this way, for every £100 a homeowner spends on gas, £8 to £15 of that cost goes straight in the bin because of inefficiencies. With an efficient heat pump installed, the heat energy produced is more than 3 times as much energy as the heat pump uses. Ultimately the efficiency difference between a gas boiler and a heat pump, plus the price difference of electricity, is what will save money over the long term.
What Can I Do About Rising Energy Prices?
If you’re already a heat pump owner, the only energy you require for heating is electricity which is great. If you’ve removed all gas appliances from your property, you’ll automatically save the daily standing charge for gas. This will save you £103.98 annually. As a fully electric household, there are some additional things that you can do to save yourself more money over the long term.
Produce your own energy
The higher the price of electricity, the more beneficial it is for you to generate your own electricity. As business, we decided to go down this route back in 2021 and installed a large PV array on our office. By our calculations, we should see a return on our investment within 4 years of installation (based on lower, 2021 electricity prices).
Prices for solar PV are lower than they’ve ever been and with the addition of battery storage, your home could become a self-sufficient micro power plant.
Work smarter, not harder
Electricity prices are not fixed throughout the day and are determined by the supply and demand of the grid. At a basic level, less demand for electricity = cheaper electricity; and the more demand there is, the more electricity will cost. As a whole, the electricity needs of the UK plummet at night time causing a huge drop in price.
What does this mean for you?
Well, if you have a battery storage system, you’ll be able to take full advantage of this price drop and charge your battery at night. The energy collected at night can then be used to help power your heat pump and the rest of your household throughout the day.
There are also a growing number of agile tariffs on the market, all linked to a smart meter, which provide a variable rate of electricity that reacts to the supply/demand driven price of electricity. In fact, we’re aware of some customers on agile tariffs who actually get paid to consume electricity at night because it’s more cost effective for an energy supplier to pay customers than it is to stop generating electricity.
If you’re on an agile tariff, you can benefit from:
Heating your water tank overnight when electricity is cheap
Keeping your house up to temperature overnight and avoiding the need for the heat pump to work hard first thing in the morning, when electricity is at a premium.
The UK will soon become less dependant on energy suppliers and more decentralised meaning agile tariffs will become the norm. As a heat pump user (and if you have an electric vehicle, or a battery storage system), you’re already well placed to take advantage of agile energy tariffs.
Efficiency is king
It might sound obvious, but when energy prices are high it’s even more important to make sure your heat pump is working as efficiently as possible. If your heat pump isn’t serviced regularly, chances are there are some efficiency improvements that can be made. Build ups in the hoses and heat exchangers all have a negative impact on flow rates, efficiencies and the delivery of heat into the building. All of this means you could be paying more than you need to.
Contact Alto Energy For A Heat Pump Quote
If you’d like to move away from your fossil fuel boiler and install a more efficient heating system, get in touch today to discuss your heat pump requirements.