The energy price gap timebomb has just moved retrofit programmes to the top of the investment agenda

Osborne Property Services Managing Director discusses the energy price gap timebomb and the concern this has for so many vulnerable low-income residents who are already struggling to manage. Outside of residents using less energy, the only meaningful solution is for housing providers and local authorities to substantially ramp up investment into their retrofit programmes and do it quickly!

These projected costs of the energy going into people’s homes is escalating beyond comprehension in normal household budgets, so simply sitting by and watching all that expensive energy leaking out of poor-quality housing is simply no longer an option.

Vicky adds that retrofit is no longer simply an issue of slowing climate change, very soon this toxic combination of extreme energy costs with leaking and inefficiently heated homes risks a public health and economic catastrophe.

In broad terms the energy price cap sets the maximum figure that can be charged to customers on a variable dual-fuel rate for typical usage of gas and electricity for a six-month period. It was introduced originally by Ofgem in 2019 and is based on several factors including the wholesale cost of power in the previous six months. Its purpose is to limit the rate a supplier can charge customers for their default tariffs.

When introduced the annual energy price gap was £1,137, by April this year it had risen to £1,971 an increase then of 54%. The cap is predicted to rise again this October by 82% predicting the annual costs for an average home to £3,587 and it remains unclear how the new PM’s energy support package will be implemented. . 

There are no signs whatsoever on the horizon that these price caps will subside in the foreseeable future. Consequently, the business case to invest in Retrofit programmes just took a giant leap forward with potential savings three times more than predicted in any retrofit models developed in early 2019.

This scale of housing retrofit needed means the process must be industrialised, one critical challenge on the road to net zero is finance. A recent report published by Bankers for Net Zero, identifies how sustainability-backed loans would help to ease the cash flow issues – essentially borrowing today against future energy cost savings. Those future energy cost savings that just got 300% more beneficial!

Retrofit at scale is a complex but deliverable task. It will proceed more smoothly if the likely barriers are identified and planned for right now. For more ideas about how to approach zero carbon retrofit at scale, visit our resource centre or contact Nick Davidge ([email protected]).