UK Households face higher energy bills on windless days

Market reforms aim to reward customers who use more power at full turbine capacity.

In calm weather, wind turbines may not be operating at their full capacity as per Government plans. Households could face higher energy bills.

As part of proposals to balance the grid more effectively, consumers who use electricity when it is windy may pay less. This was stated by the Business Department as it launched a major review on energy markets.

Ministers are also looking at lowering the charges for billpayers who live near a solar or wind farm.

The National Grid warned separately that the target to replace domestic gas boilers with heat pumps could be missed without additional support from taxpayers.

Martin Young, an energy analyst with Investec, stated that encouraging consumers to change their behaviour will lower overall costs and benefit all households.

He added, “You get your wind generation whenever the wind blows. You can’t control when the wind blows.

“By changing people’s behaviour and getting them to move around their consumption with the carrot price, then that is absolutely something we need to do.

“There will always be someone who is going to lose from a change. It is right to reduce the system costs. If you find vulnerable groups of people that would be affected, you should consider policy changes to ensure they are not disenfranchised.

According to the Government, consumers who cannot change their demand will benefit from the flexible system because it will reduce price spikes as well as make electricity more affordable.

The Government is currently working on a policy to identify the reforms that will take place. The Government anticipates that proposals will be produced by 2023.

Kwasi Kwarteng (the Business Secretary) stated: “We just saw the price of offshore UK Wind power drop to an all-time low, and gas is a shrinking part of our electricity generation mix, so it is important to look at ways to ensure that the electricity market adapts to the times.

“This includes making sure that consumers get the price benefits of increasing supplies of cheap energy, and also that the system is ready for the future.”

The so-called Review of Electricity Market Arrangements by the Government will reduce household bills by separating electricity prices from wholesale gas markets, which have seen prices rise since Vladimir Putin invaded Ukraine.

Wind power prices fell to an all-time low in the first quarter of this year. Market reforms were implemented to ensure that consumers are aware of these price drops. The current energy market prices are based on the highest-priced form of generation and follow spiralling gas prices.

Depending on where they live, consumers could see lower bills. To take into consideration the lower cost of maintaining power lines to homes, the Government is considering whether to reduce consumer bills if they are near a windfarm or other generator. This would be a major benefit to Scotland and the North of England where most wind farms are.

The announcements of the Government came amid turmoil in European energy markets. In order to save power, the International Energy Agency (IEA), urged consumers to reduce the temperature of their air conditioners by one-degree celsius.

The document stated that public buildings and government should lead in reducing energy consumption and encouraged countries to work together on rationing power within the European Union.

Fatih Birol is the executive director of IEA. He stated: “If Russia decides that it will completely cut off gas supplies before Europe can get its storage level up to 90pc., the situation would be even more serious and challenging. This will require strong solidarity, coordination, and cool-head leadership.

“European leaders must be prepared for this possibility now in order to avoid potential damage from a disjointed or destabilising response.”

The National Grid warns that plans to install millions upon millions of heat pumps in order to replace gas boilers are “insufficient” and could lead to the Government not meeting its net-zero targets.

The electric pumps heat the air outside and bring it inside. This eliminates the need to use a gas-powered heating system.

The Government set a goal to install 600,000 heat pumps annually by 2028.

However, only 60,000 pumps are currently being installed in the UK each year. £450m government subsidies will only be able to support 90,000.

According to EDF, the cost to install a heat pump ranges from £5,000 to £10,000. Labour costs are also included. EDF currently offers grants up to £5,000 for the installation and parts of heat pumps.

These subsidies will expire in 2025. National Grid stated that there is currently no indication of support beyond this date.

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