Government Must Urgently Rethink UK Heat Policy, Says OFTEC

Energy Policy Needs Urgent Rethink, Says OFTEC
Energy Policy Needs Urgent Rethink, Says OFTEC

As the price of heating oil tumbles further, falling 10% the beginning of the year, the UK’s 1.4 million rural households which depend upon oil for space and water heating are continuing to benefit.

However, with over 4.5 million people in the UK still living in fuel poverty – and many of these in rural areas – government needs to urgently address its current heat policy to help these homes become more energy efficient and cut fuel bills further. That’s according to the Oil Firing Technical Association (OFTEC), which claims to represent the interests of UK heating oil equipment manufacturers, suppliers and installers.

For the past two years, oil has remained the cheapest heating fuel for off-grid homeowners with typical annual bills for a three bed house currently around £793 pa (Sutherland Tables, October 2015). That’s  a staggering 48.7% less than LPG, a whopping 50% less expensive than electric storage heaters and some 24% less than mains gas.

According to online fuel price comparison websites the average UK selling price of kerosene at the beginning of this week stood at just 26.3 pence per litre (ppl), the lowest point since March 2007 and well over 50% cheaper than when prices peaked in spring 2013.

Unlike gas and electricity, heating oil users are saving hundreds of pounds as the price drop is being passed on to consumers. During 2015, the wholesale cost of oil fell by 44% and the average retail cost fell by a substantial 29%. By comparison, the average wholesale price of mains gas dropped by 34%, but consumers only saw their fuel bills cut by a minimal 3%. No wonder gas users are complaining!

With cost remaining a key driving factor for the majority of consumers, it is likely heating oil will continue to be the fuel of choice for existing users. Prolonged low heating oil prices could even encourage some of Great Britain’s 171,000 rural homes on LPG and 2.4 million households using electric storage heaters to switch to oil as a much cheaper option.

This is despite the introduction of government incentives to improve energy efficiency in off grid homes such as the domestic Renewable Heat Incentive (RHI) scheme in Great Britain, which aims to encourage households to switch to 100% renewable technologies such as electric heat pumps. Latest industry figures show the annual cost of heating an average home with an air source heat pump for example is £1,453 – almost twice that of oil. With such a huge difference in running costs, in addition to the upfront installation costs of between £7,000 and £19,000 for renewable systems, it’s not surprising many consumers have been reluctant to take up this step.

Jeremy Hawksley, Director General of OFTEC, the trade association for the oil heating industry, observes, “Plunging oil prices make it even less likely that consumers will take up costly schemes such as the domestic RHI, currently the government’s main vehicle to help off grid homes increase energy efficiency and reduce CO emissions.

“With low prices looking set to continue for the foreseeable future, government must now urgently re-think the UK’s heat strategy to take account of the current situation. This is especially important given the estimated 4.5 million UK households still living in fuel poverty – an issue which is more prevalent in rural areas due to the higher proportion of older, poorly insulated properties.”

Additionally, an estimated 43,900 excess deaths in England and Wales occurred last winter (2014/15), the highest number since 1999, and according to the World Health Organisation (WHO), some 30% of these were due to vulnerable people living in cold homes which they couldn’t afford to adequately heat. According to OFTEC, this equates to around 47,660 needless deaths over the last five years.

Mr. Hawksley adds, “What off grid consumers need are simple, practical and affordable solutions that will help improve energy efficiency, and importantly, cut carbon emissions. OFTEC continues to lobby government at a national and local level for change and recently submitted recommendations to DECC for a combined energy efficiency and carbon reduction policy that would encourage far greater buy-in from consumers.”

OFTEC’s recommendations include the introduction of a simple boiler scrappage scheme to encourage the 600,000 plus households in Great Britain still using old standard efficiency boilers to upgrade to high efficiency, modern condensing models. The move could see an average four bedroom home reduce annual fuel consumption by up to 24% (-784 litres p.a.) and cut CO2 emissions by 33% (-2418 kg p.a.). The potential for carbon reduction via this simple, cost effective route is huge.

Elsewhere in the UK, and a similar scheme in Northern Ireland saw more than 13,350 new oil condensing boilers installed between September 2012 and March 2015, saving over 21,500 tonnes of CO2 per annum as well as significantly reducing consumers’ fuel bills. According to OFTEC, the vast majority of these boiler replacements would not have happened without taxpayer funded subsidies.

Mr. Hawksley concludes, “The dramatic drop in oil prices we have seen in recent times represents a real opportunity for change. Government needs to recognise the playing field has changed and current schemes such as the domestic RHI, which is already proving ineffective, need to be urgently replaced with incentives that will actually work.”

Source: Oil Firing Technical Association