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UK could reduce Russian gas imports by 80% in just two years

The switch to heat pumps from boilers is key to reducing the demand for gas. Image: Centrica.

The switch to heat pumps from boilers is key to reducing the demand for gas. Image: Centrica.

The UK could reduce its Russian gas imports by 80% this year by following nine steps, says climate change think tank E3G.

While the country is not heavily reliant on Russian gas – which meets less than 4% of demand – the UK has still been exposed to surging prices, which are set internationally.

This has led analysts to predict energy bills could surge beyond £3,000 in October, potentially pushing one in three households into fuel poverty.

By following the steps outlined by the think tank, households could save between £130 and £170 on average. This would require a capital investment from public and private sources of £6.7 billion, paid back within two years.

Longer term, the package would lead to the equivalent of 149% of Russian LNG imports being saved by 2025. The total cumulative investment required is £33.6 billion, and would lead to an average annual saving of between £145 and £240. This would be paid back in five to nine years, with the impact lasting for many more, said E3G.

The steps outlined by the think tank includes increasing the support for energy efficiency through existing schemes, which includes the Local Authority Delivery Scheme, the Home Upgrade Grant, and the Public Sector and Social Housing Decarbonisation Funds.

Collectively these are worth just under £3.4 billion from 2022 to 2025, putting funding for the segment £2 billion short of that pledged in the 2019 Conservative manifesto. Funding for energy efficiency through these schemes should be expanded, and the Local Authority Delivery scheme extended through to 2025.

Second, E3G suggests the acceleration of the take-up of the most efficient appliances, in particular in the white goods, lighting and consumer electronics categories.

Third, the government should launch a major new public information campaign with a clear focus on steps that do not compromise on warmth and comfort.

“Further swift and significant gas savings can be secured through safe and sensible steps to reduce heating energy demand,” E3G wrote in its The home energy security plan: demand-side measures to lower bills and get off gas report.

“Given the current focus on these issues, the public is likely to be highly receptive to a major public information campaign – which could bolster appliance, insulation and electric heating take-up too – as has been done in the oil crises of the 20th century and the COVID-19 pandemic.”

Next, the Boiler Upgrade Scheme should be expanded to accelerate the electrification of heat. Grants of £5,000 are set to be available from April, as part of the government’s Heat and Buildings Strategy.

But only £450 million has been allocated until 2025 for the scheme, meaning a maximum of 90,000 heat pump installations could be supported. If the grant was expanded to £4.15 billion – in line with Energy Efficiency Infrastructure Group’s suggestion – it could support the installation of 820,000 heat pumps to 2025, reducing gas demand by around 8TWh per year.

Fifth, E3G suggests tax penalties on energy saving home upgrades are removed, as such upgrades are currently subject to 20% VAT as opposed to the 5% placed on new build energy efficiency measures. Cutting it back could provide £51 billion stimulus at a cost of £2.7 billion to government, as well as supporting 350,000 jobs.

Sixth, legacy policy costs should be removed to lower bills and incentivise electrification. While policies like Renewables Obligation, Feed-in-Tariffs and Contracts for Difference have helped drive investment in renewables, the cost disproportionately falls on electricity bills, disincentivising the switch from gas boilers. As such, E3G argues – as others have – that these should be switched into general taxation.

Next, the government should introduce a comprehensive training offer to fill the skills gap. Currently, there are just 2,000 trained heat pump installers for example, but the Heat Pump Association estimates that 50,000 will be needed by 2030.

Eighth, energy efficiency should be incentivised through stamp duty amendments, whereby more energy efficient homes pay a lower rate.

And finally, the phase-out of gas boilers in new build homes should be accelerated by bringing the Future Homes Standard forward to 2023.

“The nine measures outlined above could all be introduced in the Energy Supply Strategy and at the Spring Statement and would start to deliver gas demand reductions immediately,” writes E3G.

“But the national mission to move off gas swiftly and safely will not end in 2025. The government must set out clear intentions to extend successful schemes throughout this decade and to fill in identified policy gaps.”

The think tank is the latest in a growing group of charities, organisations and political parties calling for the UK to act to reduce gas dependency in light of Russia’s invasion of Ukraine and the wider energy crisis.

Prime Minister Boris Johnson is set to release a new energy security strategy by the end of the month.

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