Ambitious Warm Homes Plan crucial to lower household energy bills

Marie-Laure Hicks, Head of Policy at the Aldersgate Group, outlines why the warm homes plan must be delivered in full in order to lower bills across the country and ensure the UK delivers on its net zero target. 

The UK’s high energy bills continue to place increased pressure on people’s finances across the country. Over six million UK households are in fuel poverty, and energy debt for domestic consumers is at an all-time high, reaching around £4 billion in 2024 [1]. The government must address this as a matter of urgency – and the Warm Homes Plan is part of the answer.  

The principal reason for high energy bills is the UK energy system’s reliance on international gas markets. Gas sets the wholesale price of electricity 98% of the time, making the UK a significant outlier compared to other economies. In contrast, the EU average for gas as the price-setting factor is less than 40% and, in the case of France and Germany, gas sets the wholesale price only 7% and 24% of the time, respectively [2]. 

To address this, we must insulate energy bills from international gas prices and potential future shocks by reducing energy demand through increased energy efficiency and flexibility. Many homes in the UK are not currently energy efficient. Of homes with an EPC rating, 58% in England and 62% in Wales were rated below band C. Only 1% of UK homes are heated by a heat pump. Support for home retrofit and energy efficiency is crucial.  

The government has committed to £13.2 billion over five years for the Warm Homes Plan. This scale of investment has the potential to jump-start home retrofit in the UK, with support for low-carbon solutions such as heat pumps, solar panels and insulation. Households would see immediate returns and the scale of such a national programme would support demand and growth for the low-carbon buildings sector. For example, installing a heat pump can generate up to £1,200 in annual savings, depending on the existing heating system in place that is replaced, due to the greater efficiency of heat pumps compared to traditional heating systems [3]. Rooftop solar panels can also help households save an average £440 on energy bills by producing their own electricity [4]. Taking into account the wider economy, recent E3G analysis found that public investment in home energy efficiency would deliver substantial and long-term economic benefits [5].

The Plan must provide certainty on what support will be available and when, for both households and the businesses that will be delivering on the ground and ramping up their supply chains and workforce. Beyond the Plan itself, the government should also consider what is needed to ensure success. For example, the public can find information challenging to access – if unaddressed, this could dampen uptake of support on offer from the government. 

According to research by Santander UK, just 10% of UK adults said they felt they knew a lot about ways of improving energy efficiency [6]. Navigating planning permission, finding reliable suppliers and installers, and understanding which measures are suitable for properties of different ages and EPC ratings, are all technical and lengthy tasks which act as barriers to action. A national retrofit advice service would be valuable to provide clear, action-focused advice, tailored to each home on the most effective way to improve energy-efficiency and reduce energy bills. 

The transition to a clean energy system will provide significant benefits for consumers, and the climate, by reducing reliance on international gas with lower cost and lower carbon energy technologies. Investing in an energy system largely based on UK-produced low-carbon power generation will insulate consumer bills from exposure to international energy prices, as well as driving decarbonisation. In a scenario with a highly renewable grid (96% renewable by 2030) facing a gas price shock equivalent to the one experienced in 2022, the typical annual household electricity bill would rise by £71 – less than 9% [7].  This compares to a threefold increase in the price cap following the Russian invasion of Ukraine in 2022/3, which led to electricity bills for an average household increasing from £770 in 2021 to £1,105 in 2022, with the government having to compensate for some of the difference.  

The government’s Clean Power mission is crucial to accelerating progress towards a low-carbon, secure and affordable energy system. While investment is required upfront and new clean energy infrastructure will take time to come online, the Climate Change Committee has shown that this will result in net savings over time [8]. The government will need to ensure the cost of energy bills for households is addressed while the energy systems transitions. In the short term, the government has options at hand to reduce household energy bills, such as the creation of a social tariff to support fuel-poor households, moving policy costs applied to household energy bills to general taxation, and enabling and incentivising flexibility. 

References

[1] Ofgem (2024), Total financial value of domestic customer debt and arrears (existing for more than 91 days) 

[2] Carbon Brief (2025), Factcheck: why Conservative leader Kemi Badenoch is wrong about UK’s net-zero goal. 

[3] EST, Heat pumps: how they work, costs and savings. 

[4] Resolution Foundation (2025), Sunny day savings. 

[5] E3G, The Warm Homes Plan Will Boost UK Finances

[6] Santander UK (2024), Tomorrow’s Homes: Facing up to the UK’s Energy Efficient Buildings Challenge.

[7] E3G (2025), The UK’s Clean Power Mission: Delivering the Prize.

[8] Climate Change Committee (2025) The Seventh Carbon Budget – Advice for the UK Government

[9] Aldersgate Group and UCL (2023), The case for a social tariff. 

[10] Aldersgate Group (2025), Representation to Spending Review Phase 2. 

[11] Energy UK (2025), How to cut bills. 

[12] Citizens Advice (2025), Frozen in place.