Impact of the Energy Price Cap

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    Impact of the energy price cap

    The energy price cap, introduced on the 1st of January 2019, is the maximum amount a company can charge for their domestic or business energy supply. It was introduced to counter rising energy prices and prevent customers from being overcharged.

    The price cap was introduced by government regulator Ofgem and is assessed at the start of each quarter of the year. It can currently be changed every three months as of February 2024. The monetary rate of the price cap can increase or decrease depending on several factors, which primarily focus on the costs energy suppliers face, particularly wholesale energy.

    So, more than five years since price cap measures to limit surging domestic tariffs were introduced, how much have consumer habits changed and which household items are using more or less energy than ever before?

    We’ll aim to pinpoint these questions throughout this blog. As part of this, we’ve looked at gas and energy consumption per household, electrical appliances, and the history of the price cap to reveal how consumption compares to rising energy prices.

    Expert Comment

    Computers were responsible for the only increase in the average household energy consumption, increasing by almost 10%

    The cost of energy continues to be a hot topic in the UK, though sadly for the wrong reasons, with bills rising incredibly high. With prices soaring, we were curious about the average household consumption of various electrical appliances and whether usage habits were changing. Below are the top five electrical appliances with the most significant percentage change in average household consumption since 2019.

    Percentage change in average household energy consumption of electrical appliances

    1. Computer: 9.09% increase in average household consumption since 2019

    The only electrical appliance with an increase in average household energy consumption was the computer, with a rise of almost 10%. This increase is likely due to the greater number of people working from home, which became the norm during the pandemic.

    2. TV: 6.67% decrease in average household consumption since 2019

    Televisions saw the smallest decrease in average energy consumption of any household electrical appliance, with a 6.67% percentage change since 2019. Primary OLED televisions recorded the biggest decrease, going from an average household consumption of 64 kWh to 49 kWh per year. What makes this even more impressive is that the number of primary OLED televisions has doubled since 2019, which is no surprise given the energy efficiency of these sets.

    3. Cooking: 6.85% decrease in average household consumption since 2019

    Completing our top three is cooking appliances, with a decrease of 6.85% in average household energy consumption since 2019. Despite recording a decrease of almost 7%, the number of electric ovens, electric hobs, microwaves, and kettles has risen by just over three million.

    Percentage change in average household energy consumption of electrical appliances

    The number of cooking appliances in households has increased by 3.64% since 2019

    One of the factors that may cause an increase in energy consumption, and therefore energy bills, is a rise in the number of electrical appliances in households. But is that the case? Below, we reveal the categories of electric appliances that have risen in households the most.

    Percentage change in total electrical appliances owned by households

    1. Cooking appliances – 3.64% increase since 2019

    The electrical appliance that saw the most significant increase in households was cooking appliances, which rose by almost 4%. Cooking appliances were categorised by electric ovens, electric hobs, microwaves, and kettles, all of which saw purchases increase by at least 400,000 in the period profiled. Microwaves are one of the more energy-efficient appliances for cooking food, and this appliance saw the biggest rise in ownership, increasing by over 800,000.

    2. Computer – 3.42% increase since 2019

    Computer appliances saw the second biggest increase, rising by just under 3.5% since 2019. Computers were categorised by desktops, monitors, printers, laptops, and multifunction devices. Despite recording an overall increase, laptops and desktops were the only categories of computers to increase. Printers and multifunction devices remained the same, with monitors decreasing. Laptops are also more energy efficient than desktops, which could explain an increase in laptops and a decrease in desktops.

    3. Lighting – 2.67% increase since 2019

    Lighting appliances complete our top three, increasing by just over 2.5% since 2019. The increase in lighting appliances was largely due to the rise in LED lights over the last four years. These light sources are incredibly energy efficient, and replacing your lighting with LED lighting could save you money each year. Compared to incandescent light bulbs, they can last up to 25 times longer and use 90% less energy.

    Since 2019, the annual standard variable tariff has increased by 70%, despite decreasing by 55% in the last year

    The standard variable tariff, otherwise known as a default tariff, is where your unit rates and standing charges can increase or decrease despite the amount of energy you use. Whether or not suppliers change the amount you pay each month depends on the cost of wholesale energy and Ofgem’s price cap.

    The standard variable tariff has been updated frequently over the past four years. But how does the January 2024 price cap compare to the previous changes? Below, we reveal all.

    Annual standard varaible tariff percantage change since 2019

    1. 2019 – 2024 – 69.57% increase in standard variable tariff percentage change

    It’s been five years since Ofgem’s introduction of the energy price cap. In those five years, the price cap has fluctuated dramatically. When it was first introduced, the cap was set at £1,137, increasing to £1,277 after 18 months, less than a 10% increase from the first price cap set in January 2019. Despite recording a decrease in these 18 months, 2022 saw the price drastically increase, going from just under £1,300 in August 2021 to almost £2,000 in April 2022 and over £3,500 just four months later.

    The standard variable tariff peaked in January 2023 before steadily decreasing. Overall, the price cap has increased by 70% in five years at an average rate of 10% per year.

    Annual standard varaible tariff percantage change since 2019

    Electricity consumption has decreased by almost 10% since the energy price cap was introduced

    With the standard variable tariff dramatically increasing in the last four years, it would be fair to assume that energy consumption has increased too. But is this the case? Below we reveal the percentage change in electricity consumption per household.

    Electricity consumption per household percentage change since 2019

    1. 2019 – 2022 – 8.9% decrease in electricity consumption per household

    Energy consumption per household has decreased by almost 10% since 2019, with the final consumption reducing by over 10,000 GWh between 2021 and 2022. In fact, not only was 2022 the lowest total consumption since the energy price cap was introduced, but it was also the lowest total and average household consumption since 2008.

    Electricity consumption per household percentage change since 2019

    Gas consumption has decreased by more than 15% since the energy price cap was introduced

    As the standard variable tariff covers gas consumption, we wanted to know whether gas consumption has increased alongside the rising price cap.

    Gas consumption per household percentage change since 2019

    1. 2019 – 2022 – 15.55% decrease in gas consumption per household

    From 2019 to 2022, gas consumption per household has decreased by just over 15%. Similarly to electricity consumption, the total consumption is the lowest it has been since 2008. Between 2021 and 2022, gas consumption dropped by almost 20% despite the price cap reaching its highest price.

    Gas consumption per household percentage change since 2019

    Methodology

    We used consumption data tables and electrical product data tables from gov.uk to find the gas and energy consumption per household, the number of electrical appliances in households, and energy consumption per electrical appliance per household.

    We then used Heatable for the history of the energy price cap, using Ofgem to update with the most recent figures.

    We then calculated a year-on-year percentage increase, as well as a percentage increase from 2019 to 2022 or 2024.

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