Kensa’s Dr Stuart Gadsden emphasises the urgent need to tackle and replace inefficient heating sources to protect consumers, as Ofgem's October price cap signals further energy bill increases on the horizon for UK households.
As the energy crisis continues with no end in sight, and with a typical annual energy bill set to increase to £1,717 from October, the need to move to more efficient heating solutions less sensitive to global events has never been more critical.
Ofgem’s latest price cap rise sees a 9% uptick in typical annual energy costs. Citizens Advice has sounded the alarm, predicting that one in four people could be forced to turn off their heating and hot water and National Energy Action has warned that 6 million UK households will be in fuel poverty. And, as the war in Ukraine continues, energy experts are predicting further price increases in January, suggesting this crisis for billpayers isn’t going away anytime soon.
Where urgent action is needed
When energy prices rise, those with the least efficient heating systems often bear the brunt. Outdated, ageing gas boilers or electric heaters, whether panel or night storage, can leave households paying eye-watering amounts to barely warm their homes. These systems typically operate at between 60-85% (gas boilers) and 100% efficiency (direct electric heating), meaning one unit of energy can only produce up to one unit or less of heat in return.
Electricity costs significantly more than gas per unit, which is why households with direct electric heating will be hit hardest by this latest rise. In the last few years, we’ve had social housing residents living in one and two-bedroom flats equipped with these outdated electric systems share with us the staggering amounts they pay for heating – sometimes as much as £2,000 a year.
According to our modelling and the upcoming energy price cap, heating costs for a two-bedroom flat with 100% efficient night storage heaters on an Economy 7 tariff are likely to be around £1,200 per year. This is likely a best-case scenario, and for many people, the situation could be much worse. It’s a hefty sum to heat a relatively small property, particularly if people’s budgets are already stretched thin due to the rising costs of everyday items like groceries.
As October approaches, many households will again face the hard choice between staying warm and putting food on the table. Urgent action is needed to shield those already trapped in fuel poverty from the harsh reality of rising prices, especially with another hike looming in January.
An effective solution
The key to addressing rising energy costs is to ensure properties are equipped with suitable, efficient heating systems. While new builds benefit from high energy efficiency and advanced renewable heating solutions like Networked Heat Pumps and heat networks, the real challenge is upgrading existing buildings – including the thousands of social housing homes with low EPC energy efficiency ratings.
To tackle this, the government has committed £3.8 billion through various waves of the Social Housing Decarbonisation Fund (SHDF) to enhance energy efficiency in existing social housing. Later this year, SHDF Wave 3 will unlock the remaining £1.2 billion, giving local authorities and housing associations the money needed to make critical upgrades.
By using previous SHDF waves and partnering with companies like Kensa, social housing organisations have boosted energy efficiency in their properties by installing cutting-edge technologies like ground source heat pumps. While these upgrades help providers meet their energy efficiency targets, the biggest winners are the residents, who can see significant drops in their heating and hot water bills.
Our solution of Networked Heat Pumps, which consists of installing compact ground source heat pumps in individual flats or houses, can provide renewable heating and hot water with efficiencies of 400% and above.
For the two-bed flat with electric night storage heaters that are paying £1,200 a year on heating, if you replaced it with this 400% efficient networked heat pump system, they could see annual heating bills of just £487 - a substantial £724 saving!
Our modelling, backed up by multiple installations and real-life experiences, tells us Networked Heat Pumps can cut heating bills by 50% or more when replacing systems like electric storage heaters. In Thurrock, a project which saw outdated night storage heaters replaced with Kensa Shoebox Heat Pumps across 273 flats, our solution even resulted in some residents cutting their energy bills by an astonishing 66%.
The opportunity for social housing landlords
Over 4,000 UK social housing properties, including more than 1,700 flats in tower blocks, currently receive heating through our Networked Heat Pump solution. Come October, it’s very likely that those residents will be able to afford heating and hot water when they need it. We’re encouraging social landlords to take this opportunity now to decarbonise their stock at scale and take residents out of fuel poverty for good.
Sources:
- Citizens Advice: https://www.citizensadvice.org.uk/about-us/media-centre/press-releases/one-in-four-people-could-be-forced-to-turn-off-their-heating-and-hot-water/
- National Energy Action: https://www.nea.org.uk/news/october-energy-bill-rise-to-plunge-400000-more-uk-households-into-fuel-poverty-this-winter/?parent=about-us/media-centre/media/&_gl=1*1x9y3v9*_up*MQ..&gclid=CjwKCAjw5qC2BhB8EiwAvqa41p205u33m2GwXqP9xpYBBRXIXz6gi6eE03Gfwf29DRfQpUYmQaOkcBoCl3EQAvD_BwE
- Gas Boiler Efficiency: https://www.theheatinghub.co.uk/boiler-efficiency-guide-and-energy-saving-tips
- Social Housing Decarbonisation Fund: https://www.gov.uk/government/publications/social-housing-decarbonisation-fund-wave-3
- 100% Night Storage Heater Modelling: direct electric storage heater efficiency = 100%; Economy 7 peak rate is 27.74 pence/kWh and Economy 7 off-peak rate is 11.57 pence/kWh from Money Saving Expert; 70% of heating and hot water assumed to be provided using off-peak and 30% of heating and hot water assumed to be provided using peak.
- 400% Networked Heat Pump Modelling: annual space heating demand = 5,378 kWh; annual domestic hot water demand = 2,000 kWh; Kensa Shoebox NX MCS SCOP in space heating mode is 400% @ B0/W45; Kensa Shoebox NX MCS SCOP in domestic hot water mode is 310% @ B0/W65; standard rate electricity is 24.5 pence/kWh based on Ofgem energy price cap from 1 October.
- Residents in Thurrock saw heating and hot water bills drop 66%: https://www.kensacontracting.com/thurrock-council/
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