Ofgem, the energy regulator in the UK published a new climate action plan in February 2020. Ofgem support ambitious energy initiatives that are working to achieving the UK target of being virtually carbon neutral at 2050. Many consumers are worried though, as they are most concerned about the fact that these positive changes will be at their expense with Ofgem bolstering their energy bills to pay for new updates.
Ofgem’s proposed changes, or 9 steps for achieving carbon neutrality, is said to hit those who can least afford it the hardest, if it is not executed correctly. However, some of the 9 proposed changes are unlikely to have any affect on consumers, but rather the companies they pay their money to. For example, the UK energy regulator is going to change the way energy companies can spend their profits.
As a payday loan direct lender, we know that surprising energy bills and unexpected spikes in your tariffs can hit you hard as this is a common reason people apply for our payday loans. Here at Wizzcash, our guide is looking at the proposed Ofgem changes and how they might affect you.
The energy regulator has included “work with government and industry to decarbonise heating” as one of their crucial solutions. As heating accounts for 37% of greenhouse gas emissions, this seems like an effective and reasonable change, but will it cost the consumer?
Over 90% of UK boilers are heated using gas or oil. This is not an eco-option. There are no formal plans currently outlined by the government or Ofgem, but there are some eco-alternatives that may seem to de-carbonise your heating but might be worth avoiding:
- Electric radiators – These might seem like the cheapest, eco-conscious way to move away from the harm your gas boiler is doing, but they are likely to incur a big running cost. Similarly, if you are using these radiators during peak times, you will be drawing on a grid fuelled by greenhouse gasses. This means you will not be opting for an eco-friendly alternative.
- Heat pumps – Heat pumps will reduce heating carbon emissions by 50 – 60%. The catch is they are extremely expensive to install, ranging from anywhere between £12,500 – £23,000, but it is worth noting that a government grant is available to encourage this kind of eco-conscious choice. You could also enjoy a fantastic reduction in your energy bills.
Create an Offshore Grid
In 2019, renewable energy took over traditional fossil fuels for the first time ever in the UK. It’s no surprise that Ofgem are looking to make a push on this completely renewable energy by building even more offshore wind farms, following these results after a “series of new windfarm openings”.
Ofgem’s commitment to building a new offshore grid is supported by the Labour party’s plans for 37 new offshore plants, which are set to create 70,000 new jobs. For the consumer, experts note that offshore windfarms would make energy consumption cheaper, in comparison to electrical power. Similarly, the cost of building offshore wind farms is at a new low, so it is also the most cost effective way for Britain to achieve carbon neutrality by 2050.
Low Carbon Products For Consumers
Ofgem state “we will support innovation and experimentation, particularly in the retail market, to create low carbon products and services that will directly benefit consumers”. It is unclear as to what benefits Ofgem are talking about, especially as many people believe eco-friendly alternatives are often considered more expensive or likely to have a bigger up-front cost. However, if you consider one of the best examples of consumer products that have been developed to be more efficient, household appliances, you could save money in the long run.
Regulations were implemented to ensure that the energy rating certificate of household appliances never slipped below a D. Currently, they are ranked between an A+++ and a D. This rule came into play in 2010. If your goods are ranked at an A+++, you could save £113 every year, per appliance, but this depends on the type of appliance. The best way to make these changes is likely to be naturally. For example, when it is time for you to replace your appliance, ensure you shop around for a good deal and one that is as efficient as possible. Reports show that the biggest savings could be made on fridge-freezers.
As with all technology, it’s likely that new products will initially be expensive. However, as the government and Ofgem want to encourage consumers to make eco-conscious purchasing decisions, we could see goods and services price capped. Alternatively, other incentives could be offered to make the switch.
Support Electric Car Growth
Here at Wizzcash, we have written about the costs, pros and cons of electric cars before. The government recently came out to say they would be implementing a ban of hybrid, petrol and diesel cars by 2035, moving up their goal by 10 years. Currently, this seems a little daunting and an ambitious change, but to support it, Ofgem have said they will develop a regulatory strategy to help get 10 million electric cars on the road by 2030. This is an increase of 9,962,150 in just 10 years.
As the watchdog of energy firms in the UK, Ofgem have the power to direct how energy companies spend and invest their money in sustainable fuel and energy alternatives. This means they could encourage huge corporations to invest in the development and implementation of more electric car charging points, for example, from lampposts. This would make it easier for those people who live in flats or who only have street parking to change to eco-friendly transport. There are a lot of obstacles, including practicality and upfront cost, standing in the way of Ofgem achieving their goal, but their support could go a long way in making these cars more accessible for consumers.
Here at Wizzcash, we are excited to see cleaner energy become more popularised and more accessible to everyone in the UK. It’s important to us that anyone looking to switch their appliance and make changes to becoming more carbon neutral do so with their finances in mind, protecting both your financial security by reducing your household emissions.