“Follow the money”

25th Nov 2019

 

Follow the money is a phrase used in many a crime investigation. It applies to other walks of life too. Here’s an example from a few weeks ago.

I was listening to the radio while driving to a meeting when I heard an energy CEO, I won’t name him, let’s refer to him as ‘Woods’. 

Well, Woods proclaimed that there was no future for gas boilers and air source heat pumps would supply the warmth and comfort the UK needs to 23 million homes. Now let me make it clear, I think ASHPs have an important role to play in supplying heat to homes in the UK, but to that many, no. The end of gas to peoples’ homes, a big no. So I wondered why did Woods suggest this? His company doesn’t sell heat pumps. 

But they do supply gas and electricity to consumers. So this week I looked up their standard tariffs for both, the standing charges are broadly comparable but the usage tariffs vary massively. 17.727p per kWh for electric compared to 3.668p for gas. 

So my initial reaction to Woods is “What is it about charging consumers nearly 5 times the price for their energy that first attracted you to an all-electric future?” 

Now Woods runs a large corporation and he’ll have analysts challenging this line of attack. They’ll say a heat pump is more efficient than a boiler, so you can’t compare the headline tariff rates. And of course, they are right. So let’s make that adjustment, after all, we want to be fair to the consumer as well as Woods. 

Using Ofgem’s TDCVs of 12,000 units of gas consumption (medium usage) this implies, at a 90% boiler efficiency, 10,800 kWh of heat is required. The gas bill (12,000 x 3.668p) gives an annual bill of £440.16 for usage. Taking 10,800 kWh of heat demand, at a COP of 2.5 for a heat pump, requires 4320 kWh of electricity. (4320 x 17.727p) gives an equivalent bill of £765.81. That’s a whopping £325.65 more the consumer will have to pay, or 74 % increase. 

Next time Woods goes on air, perhaps he’ll explain what attracts him to increasing customer bills by 74 %? That would be worth listening to.

Best wishes

Mike Foster, CEO