The UK needs to find ways to lower energy bills before households will accept the cost of emissions-savings technologies like heat pumps and electric vehicles.
To make bills cheaper, policymakers should remove some fixed costs like standing charges as well as creating a long-term social tariff subsidized by the government, according to Raman Bhatia, chief executive officer of Ovo Energy Ltd. Britain’s weak economy is making the task even more difficult, he said.
“You need to hold hands with customers who are really suffering under the cost-of-living crisis,” he said in an interview. “Let’s solve the emerging bill issues first — remove the standing charge, remove regressive policy costs, put them in general taxation — and then the cost of the transition at a household level is more palatable.”
Britain remains in the midst of an historic cost-of-living crisis, with consumers having to pay more for everything from food and fuel to housing. While inflation has eased from the highest level in decades, it’s still stubbornly elevated. Energy bills are set to fall from October, though millions of households could still face higher costs in the coming months, following the phase-out of government support.
The dilemma is being compounded by calls from right-wing lawmakers in the Conservative party to water down net zero policies, citing affordability concerns.
Read more: The Inflation Crisis Is Fraying Europe’s Climate Consensus
“The short-term challenge to think about is the nexus between economic growth for our country and net zero,” Bhatia said. “How do you thread the needle, how do you find that overlap?”
Energy poverty campaigners are warning that electricity and gas may become even more unaffordable this winter, with household debt already rising. Suppliers are questioning whether the price cap is the best way to help people most in need. A long-term social tariff could replace it, according to Bhatia.
Ministers have struggled for years with how best to encourage households to spend more on making their homes energy efficient: to swap gas boilers for heat pumps and to upgrade cars to electric versions. After several unsuccessful subsidy programs, the Conservative government still hasn’t found a solution.
“We want the government to provide a consistent, decisive and long-term view that includes keeping the mandates around EVs, boilers and keeping the net zero pathway in tact,” Bhatia said.
