UK looks to promote electrification via tax switch from power to gas bills: report

The UK government is considering moving environmental taxes in residential electricity bills to residential gas bills to encourage electrification, the Financial Times reported Sept. 30.

Environmental and social obligation taxes make up around a quarter of the average residential electricity bill, according to energy regulator Ofgem. The average UK electricity bill in 2020 was around GBP700 ($943)/year, while customers on dual fuel bills paid an average of GBP585/year for the power component.

"We want to encourage people to take up technologies such as heat pumps and electric vehicles," the Department for Energy and Industrial Strategy told S&P Global Platts Sept. 30.

"Affordability for consumers and taxpayers will be at the heart of our approach, as will ensuring protections remain in place for the most vulnerable," BEIS said, a response to fears that moving around GBP150-GBP175/year from power to gas bills would exacerbate the current hike in household gas costs.

"No decisions have been taken on our approach," the ministry said.

In a December 2020 energy white paper, the government said it would launch a call for evidence on energy consumer funding, fairness and affordability.

How costs are apportioned between electricity and gas "can incentivize or disincentivize" consumer behavior that drives decarbonization, it said.

Moving household consumers away from natural gas is a central challenge in the government's net zero ambitions.

Prime Minister Boris Johnson's November 2020 10-point climate change plan included GBP1 billion of funding this year to support energy efficiency in homes and public buildings, and a target to install 600,000 electric heat pumps every year by 2028.

In April, the government announced its sixth carbon budget to reduce emissions by 78% by 2035 compared with 1990 levels.

A boom in flexible generation assets would be needed to support deployment of heat pumps and the recharging of around 15 million electric vehicles by 2030, it said.