Surging Energy Prices Shine Spotlight on Britain’s Leaky Homes

(Bloomberg) -- The cost of heating Britain's leaky housing stock is growing as rapidly rising energy prices highlight the need to tackle poorly-insulated buildings.

About 6 million families in the U.K. will pay a combined 3.9 billion-pound ($5.2 billion) surcharge on their energy bills when the price cap rises in April, according to think tank the Resolution Foundation. Poorly-insulated homes have always cost more to heat, but the scale of this will surge when the limit increases 54% next month.

Now, about 85% of U.K. homes use natural gas for heating, making it one of the most difficult sectors to decarbonize. It's also expensive to make the shift. Heat pumps, which use electricity to absorb warmth from the air and transfer it into radiators and underfloor heating, typically cost about three times as much as a gas boiler. They also work much more efficiently in well-insulated buildings.

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“This long-term insulation challenge will be brought home to households very soon when energy bills rise,” said Jonny Marshall, Senior Economist at the Resolution Foundation. “It is vital that the government ramp up progress in insulating homes.”

The U.K. government is spending 3.9 billion pounds to drive down carbon emissions from buildings. Measures include grants for homeowners that replace gas boilers with cleaner heat pumps, and funding to help decarbonize poorer households and public sector properties.

The challenges are more acute for low-income homeowners because 72% of them will need their houses improved, according to the Resolution Foundation. For people living in London, the figure is 81%. The potential cost of insulation upgrades are unaffordable for many at about 8,900 pounds.

The price cap level could rise again at the next measure in October. Huge levels of volatility in energy markets, caused by the crisis in Ukraine, have led to estimates that it could surge a further 50% if gas costs don't retreat. Futures jumped again on Monday amid fears of possible shortages of the fuel from Russia.

The Confederation of British Industry has called on the U.K. Chancellor Rishi Sunak to tackle high energy prices in his Spring Statement due later this month by improving home energy efficiency through new grants for decarbonized heating systems.