Maintaining downward pressure on energy bills

The UK’s transition to new energy isn’t just about delivering a cleaner, greener future. It’s an opportunity to make bills cheaper – for everyone.  But as the UK works towards this, we see the cost of largescale infrastructure projects adding to non-commodity costs. Without interventions, bills are expected to rise further between now and 2030.

We need to build on the work E.ON is already doing to help lower bills and consider new ways to go further so the energy transition works – for everyone. It’s time to remove legacy policy costs from customers’ bills. And it’s time to look at a new financial mechanism, which would spread the cost of expensive infrastructure projects over several decades.

E.ON is already finding ways to deliver more affordable clean power

The way we use energy is changing. Customers using solar panels, batteries, heat pumps and electric vehicles, and shifting their demand over the day to benefit from cheaper tariffs, are already finding that demand-side flexibility helps them to take control of their energy use and lower their bills. 

We’re taking this further so the benefits of flexibility can be kept within communities, and we’re doing this in a number of ways including:

1. Investing in Allume’s SolShare technology so people living in flats can finally receive an allocation of the energy generated their building’s solar system in an equitable way, leading to lower bills.
2. Piloting an energy community project in Newham, which allows local residents to benefit from surplus generation, thanks to a solar system installed on a nearby school.
3. Investing in the homes of fuel-poor households through a free battery and other interventions. In Coventry, these customers are seeing an average saving of £255 per year. In Starbeck and Crowle, we’re working with Northern Powergrid to help customers save up to 15% and help alleviate local grid constraints.
4. Helping to remove the financial barriers to assets like solar panels and heat pumps, through Next Gen Home, which allows customers to receive up to £20,000 of kit, without the upfront cost.

By building an energy system from the ground up and investing in people’s homes, we can unleash the potential of low carbon technologies and reduce the need for new and expensive infrastructure. 

But if we all want lower bills now and in the future, we must go further.

Easing the burden on customers by removing legacy policy costs

UK customers have historically paid for energy infrastructure via their energy bills.

With energy bills remaining significantly above October 2021 levels, should policymakers continue to expect households and businesses to fund the full cost of infrastructure investment via bills? 

Some legacy policy costs – Renewables Obligation (RO) and Feed-in-Tariff (FiT) schemes – now look like poor value for money.  While we accept that these early Government schemes were essential to stimulate the market, and evidence points to their success, as illustrated by reductions in the cost of offshore wind and solar, we propose transferring these costs into Government expenditure, immediately removing them from domestic electricity bills. 

To go even further, scrapping the UK’s Carbon Price Floor now that coal is no longer running, would lead to further savings for consumers.  

A new way to alleviate short-term pressures by deferring policy and infrastructure costs

Customers are being asked to pay upfront for the investment needed to deliver clean power by 2030 before seeing the benefits.

We can address this by allowing households and businesses to defer some of the costs of the energy transition today. We propose a new financing mechanism that does not undermine existing generation contracts. Eventually, customers would still pay these costs back, but the timing of the repayments can be designed to coincide with the benefits of the energy transition when we actually see them.  By setting the size of the repayments at a level that is affordable, these payments can be spread over a few decades, and reduce the immediate pressure felt by customers.

Implementing this proposal would require the creation of a new financing body, which would effectively make contributions on behalf of customers for a defined period.  The financing body would also have the legal right to collect money from customers in the future when repayments of the deferred costs begin. To ensure no one can avoid paying back these costs, recovering them via network charges would be the most obvious pathway. 

The question then is whether the new financing body resides within the public or private sector.  This is ultimately a decision for Government to make, but we believe a private sector financing solution can be credibly developed.

E.ON taking action

We are ready to work with Government, Ofgem and the wider industry to find practical solutions that address the short-term energy bill pressures we are facing into.  There is no silver bullet, but we believe it is possible to stop further bill increases caused by non-commodity costs. By scaling up consumer-led flexibility, we can go further and help cut bills by the end of the decade. 

It’s on us all to make the transition to new energy affordable, now and in the future, ensuring no one is left behind.