Are high energy prices are here to stay?

Despite some speculation that record high energy prices will eventually go down, our analysis shows otherwise. To begin with the obvious… they have always been going up.

But there are other reasons, beyond Russia and Ukraine, to say current high prices are here to stay, and likely to increase further.

National debt and inflation

Since 2001, the UK’s gross debt as a % of GDP has tripled. And now we face the highest inflation rates in 40 years and a potential post-pandemic recession. Considering the long-term impacts of geopolitical tensions, supply chain issues and climate catastrophes, inflation rates1 are likely to remain high.

National borrowing2 will continue to shoot up.

Net zero by 2050 vs the immediate crisis

The government has made a legally binding pledge to reach net zero carbon emissions by 2050. To reach this ambitious target, we require strong leadership and immense investments, supported by clear policy and actions.

Unfortunately, we have none. Even the High Court has ruled the UK pathway to net zero ‘inadequate’3, and the related carbon budgets insufficient.

With the cost-of-living crisis deepening, the government’s priority is on helping the millions of households who can no longer afford their bills or food, leaving limited capacity to meet serious challenges in the medium to long term.

The short term focus on symptoms of the cost-of-living crisis will hinder investments needed, to establish a sustainable infrastructure and economy, to fund clean technologies, renewable energy generation and storage.

Despite renewables being the cheapest source of energy, cheaper than fossil fuels, consumers are not receiving the benefits of going green. Not yet.

The current market is built on, and for, fossil fuels. While we take our time to revolutionise the energy market and transition to green energy – we continue to rely on increasingly expensive and polluting fossil fuels4.

We need to invest and rebuild now. Not just commit to vague promises for the distant future without clear actions. Eventually – a greener grid would help to stabilise energy prices long term, and everyone but polluters will win.

Complete decarbonisation & grid electrification

Electrification means moving away from fossil fuels as a source of energy, such as gas or oil-fired central heating. And if your energy provider only sells you renewable energy – you’ve basically decarbonised your home.

This is what we need to do, as fast as possible, on a global scale – to avert the worst of the climate crisis.

But it won’t be easy or cheap…

While the electricity demand in the UK has been going down slightly in the past years, complete decarbonisation, and electrification – a strategy in line with our government’s net zero pledges – will put our electricity grid under a lot more pressure.

  • Electric Heat Pumps

The UK Net Zero strategy, realistic or not, outlines scaling up from installing 35,000 hydronic heat pumps a year, to potentially installing 1.7 million heat pumps, each year, by mid-2030s5.

There will be more demand for electricity, especially if we want to achieve net zero.

Another thing to consider is the additional running costs of an electric heat pump. They are about 4x more efficient than gas boilers. But as long as gas is much cheaper than electricity, the efficiency savings do not translate into financial savings by running it 6.

  • Electric Vehicles

Further increasing the pressures on grid capacity is the growing popularity of electric cars (EVs). Options for beautiful cars with decent range now go way beyond Tesla.

In 2021, more new electric cars were registered than in the whole period from 2016-2020.

In June 2022, 16.1% of all new cars registered, are electric. Their market share is growing rapidly. Close to 1.3 million cars on our roads now are either fully electric or plug-in hybrids7.

The UK is phasing out selling new petrol/diesel cars and vans by 2030 and all new cars must be zero emissions from 20358. That means a lot more electric charging.

  • Renewable Energy Infrastructure

The UK Department for Business, Energy, and Industrial Strategy (BEIS) projects doubling the electricity generation capacity by 2040, mainly from renewable energy technologies. This forecast is largely focused on renewables, imports from Europe, and storage9.

All of these are high-cost investments and as we already have a funding gap in the carbon budgets, this process will continue to drive prices upwards.

Other factors suggesting high energy prices are here to stay:

  • Global carbon reduction targets (carbon tax)
  • Increased demand from other sectors and/or drives – for example, cooling during hot weather and increasingly frequent heatwaves
  • Shifting from natural gas to electrical heating
  • Replacing natural gas with alternatives like hydrogen is expensive to produce and move around
  • Carbon capture and storage is very expensive – power plants will have to capture and store residual carbon emissions

What can you do in the short term?

The short answer is – reduce. Cut down on what you consume and waste. All of us need to apply this in our homes, offices, schools, everywhere.

The most effective way to reduce your energy bills and environmental footprint is to take measures that prevent wasting energy. The technologies to help us exist already – we just need to start applying them.

In our experience, retrofitting LEDs and connecting a smart building control system reduces lighting energy load by up to 90%. Combined with on-site solar power generation, this could halve your electricity consumption. In larger buildings, all this work could be paid in full by your energy savings.

We must also hold our government and energy providers responsible, for moving to cheap renewables ASAP.

Otherwise, we’ll keep paying the fossil fuel ‘premium’ on energy prices and funding the world’s largest polluters.

At a time when we need a concerted, global effort to mitigate the climate crisis, and while ordinary people are struggling with the cost of just living, oil and gas companies are posting record earnings. These profits are largely given out to shareholders.10

They continue to invest heavily in misleading us – greenwashing, whereas only a fraction of long-term investments is dedicated to sources of low-carbon energy, like wind and solar11.

We, as consumers and a society, must accelerate the transition to clean energy. We must demand renewables and wean ourselves off fossil fuels.

Because when there is sufficient demand, the market will have to respond, and our energy prices will eventually stabilise.

Do you want to get ahead of the game?

CILS have completed hundreds of smart building projects – including energy-efficient lighting and solar PV turnkey solutions – savings our clients millions on their electricity bills, and helping them achieve their ESG and net zero targets.

Get in touch with our Solution Development team if you want to reduce your energy bills and protect your budget against future energy price increases.



Kelly Meiessaar

Kelly Meiessaar

Kelly joined CILS from the charity sector. She knew that, although charitable causes help millions of people in the UK, preventative climate action is more urgent.

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