UPDATE: Ofgem Announces Updated Energy Price Cap - Implications for EV Drivers (November 2023)

As we head deeper into winter, the Office of Gas and Electricity Markets (Ofgem) has made another update to the energy price cap, reflecting ongoing changes in the energy market. This latest adjustment, effective January 2024, modifies the price caps for gas and electricity yet again. We will continue to update this post with the latest announcements from Ofgem.

Here's what you need to know about the latest changes:

  • The price of electricity will rise to 29p/kWh.
  • The cost of gas will increase to 7p/kWh.

For EV drivers participating in our EV salary sacrifice scheme, this still represents a major saving on your monthly charging vs fueling costs, as highlighted below.

Cost comparison in brief

We have updated our fuel price comparison figures below in light of these new caps.

A year in retrospect: The energy pricing rollercoaster

The past year has been a whirlwind for energy pricing, with announcements coming thick and fast, often reversing or superseding earlier declarations.

In April 2022, Ofgem rattled households by announcing an increase in the energy price cap, which saw bills surge by £693 for approximately 22 million customers. Fast forward to August 2022, Ofgem again made headlines with a new price cap, under which bills were set to rise by around £900 over the next 12 months. This included a £400 Government grant and had many families bracing for higher utility bills for the impending winter.

Then, in a turn of events, September 2022 saw the newly-appointed Prime Minister Liz Truss announce an energy bill price freeze, effective until 2024. This was designed to keep the average household energy bill under £2,500, superseding all previous Ofgem price cap changes and potentially saving households approximately £1,000 per year.

However, the rollercoaster didn't stop there. Jeremy Hunt announced in October 2022 that this freeze would only be effective until April 2023, adding an air of uncertainty to future energy costs.

To make matters more complex, Ofgem shifted its approach to the frequency of price cap changes. Previously, caps were reviewed every six months; moving forward, these will now be reviewed every three months. This update supersedes the September 2023 energy cap reduction.

This constant ebb and flow left consumers and EV drivers navigating a dynamic and rapidly changing landscape, all while trying to determine the most cost-effective way to power their vehicles and homes.

So, with all these fluctuations, you might be asking: “Is driving an electric vehicle still cheaper than a petrol or diesel car?”

Spoiler alert: The latest Ofgem update only strengthens the financial case for going electric, especially if you take advantage of our EV salary sacrifice scheme. Keep reading to see just how much you could save.

In this article we cover:

Note: Looking to get started with a salary sacrifice scheme that has no hidden cost and offers the best early termination policies? Get started with loveelectric for free.

Fuel price comparison: electricity (kWh) vs. petrol/diesel (pence per litre)

The electric vehicle boom has seen UK roads flooded with eco-cars whispering past. When they became mainstream, the cavernous gap between the cost of petrol and electricity made the switch to an EV a no-brainer. But the gap has narrowed, with many asking if it's still worth it.

Even though energy prices continue to rise, it's important to keep perspective. The price gap between recharging with electricity and filling up with petrol/diesel is notable - the bottom line is that electricity is still a cheaper 'per mile' solution than traditional fuel.

Pence per mile comparison

In 2021, those paying by direct-debit spent around 18.5p per kWh on electricity. After a seismic shift in the UK's energy supply chain, the latter end of 2022 looked to push that average cost up to 51p per kWh.

Cost as per Ofgem’s New Price Cap (January 2024):

With Ofgem's new price cap effective January 2024, the average cost of electricity will rise to 29p/kWh. For the Vauxhall Corsa E, this results in a cost-to-charge figure of approximately £14.50 (29p x 50 kWh battery). With a range of 209 miles, that's just about 6.94p per mile.

Previous Cost as per Ofgem’s September Price Cap:

Before this update, the average cost of electricity now sits at 27.35p/kWh. For the Vauxhall Corsa E, this results in a cost-to-charge figure of approximately £13.68. With a range of 209 miles, that's just 6.54p per mile.

Previous Cost After £2,500 Freeze (August 2022):

Before this update, the average annual energy bill was frozen at £2,500, setting the electricity price at 34p/kWh. This made the cost-to-charge figure for the Vauxhall Corsa E approximately £17, with a cost per mile of 12p.

Cost Using an EV-Friendly Tariff:

Using an EV-friendly tariff, the Corsa E can be charged four hours a day at only 4.50p/kWh. If only charged during these off-peak times, a full charge is approximately £2.25. That's just 1.07p per mile.

Petrol Comparison (Updated for May-August 2023):

The petrol-powered 1.2L Corsa achieves 49 mpg. Petrol prices have fluctuated, with the average price in November 2023 standing at 152.46p per litre. This places the 1.2L Corsa at a cost per mile of approximately 14.23p.

Summary:

  • New Ofgem Price Cap: The cost of electricity will rise to 29p/kWh from January 2024.
  • Electric Corsa E Cost: At this new rate, the cost-per-mile is approximately 6.94p.
  • Petrol Corsa Cost: Based on recent average petrol prices, the cost-per-mile is around 14.23p.
  • EV-Friendly Tariff: With an EV-friendly tariff, the electric Corsa E could cost as little as 1.07p per mile.
  • Clear Advantage: Whether using standard or EV-friendly rates, the electric Corsa E is significantly cheaper than the petrol version.

What's the cheapest way to charge an electric vehicle?

Calculating the cost to charge an electric vehicle rests solely on the price per kWh. But unlike petrol prices - which may only differ by a few pence per litre depending on the filling station - the charge for electricity can vary wildly. With a bit of research and due diligence however, charging your EV can still be incredibly cheap.

There is one general rule of thumb though - it's almost always cheaper to charge at home.

Smart Charging

For maximum savings, a smart charger should be used in conjunction with a variable energy tariff.

A standard home charger behaves like any other domestic device; it dispenses electricity when you plug it in, then stops when you unplug. Smart charging however, allows drivers to utilise the lowest possible electricity tariffs by scheduling when the charger is active. It's better for the environment too.

There's a more comprehensive breakdown of energy cost below, but the price paid for electricity is largely set by two factors: the cost an energy retailer purchases it for on the wholesale market, and the time of day it's consumed by a household.

In the evening, demand for electricity and gas is at its highest. This drives the price up and forces the grid to supplement the increased demand with gas-fuelled power stations. It's worse for the environment and costs more. If possible, don't charge your EV as soon as you're home from work.

A smart charger utilises windows of low energy demand during off-peak hours. This typically means the power comes from renewable energy sources rather than gas, driving both the cost and environmental impact down.

Variable energy tariff

Due to the monumental shift in motoring habits, many energy suppliers now offer EV-specific energy tariffs.

These tariffs differ from regular deals by including a few hours of low-cost, all-green, energy - perfect for recharging an electric vehicle overnight.

As previously mentioned, installing a smart charger is vital to making the most of these tariffs. Most suppliers only offer these windows of reduced cost between midnight and 4/5am. Programming the smart charger when to charge, and how long for, ensures the EV is primarily charged at the far cheaper pence/kWh rate.

We've outlined the best tariffs for EV drivers below.

Install photovoltaics

Utilising photovoltaics (PV) allows you to create renewable, cost-free electricity. These are very similar to solar panels, except PVs convert solar power into electricity, rather than heat. Relying on solar power may seem like a fruitless effort under UK skies. But the annual electricity production from a PV in Britain is surprisingly high.

On average, one kilowatt of panels will generate 700 - 900 kWh of electricity every year. In a domestic setting, it costs around £1,500 per kilowatt to have the array installed (figs. from early 2020).

For a typical household, a south-facing 3.5kW photovoltaic array is more than sufficient and would produce around 3,000kWh annually. That's enough to fully recharge a Vauxhall Corsa E 60 times.

So how long would it take before you started to save? Well, a 3.5kW array would cost roughly £5250 to be installed. By taking a base price of 51p/kWh, a Vauxhall Corsa E would only need to be recharged 202 times for the solar array to have paid for itself. With the 3,000kWh annual output, that would take just under 4 years.

Charge at work

The absolute best way to enjoy zero carbon motoring, is by charging for free!

Many employers across the UK have ramped up the installation of charge points at office spaces in response to the vast uptake of EVs. The Government has even introduced a Workplace Charging Scheme - greatly reducing the cost of installing chargers. Workplace charging can be a great incentive for prospective employees, as well as encourage the uptake for current ones.

Workplace charging is often at a per/kWh rate far lower than you'll find out on the open road, too.

Top 3 EV-Friendly Energy Tariffs

Below are our top picks of the best energy tariffs for electric vehicle owners.

Due to the energy crisis and preferential rates, some tariffs are only offered to existing customers and won't appear on price comparison sites. However, there is a workaround if they're not currently your supplier. If you'd like to take advantage of these cheaper rates, simply switch to another of its accessible tariffs first. You'll then be a fully-fledged customer and thus be able to then access their EV-specific tariffs.

It's also important to note that because these tariffs are aimed at EV drivers, some suppliers may ask for proof of electric vehicle ownership (this doesn't mean bought outright - salary sacrifice, personal lease etc. still count). Your home must also have a SMETS2 smart meter installed and you consent for automatic readings to be sent off every 30 minutes.

Another thing to look for is the unit rate vs. standing charge when comparing tariffs. The unit rate is the headline figure of the tariff - how many pence is it per/kWh? The standing charge is a daily rate that you'll pay regardless of the energy used.

The below rates are for a Yorkshire postcode.

  • EDF GoElectric 35
    ‍    EDF offers their lowest off-peak rate for five hours between 00:00 and 05:00 every day, ensuring the energy provided is 100% zero carbon renewable electricity.
    Our postcode rates set the standing charge at 49.53p/day with off-peak electricity at 4.5p/kWh.
  • Octopus Go
    This deal offers cheaper rates during specific time periods. Their postcode calculator lets you view your specific rate during these off-peak hours, which is obviously the best time to charge. On our example, we are able to get four hours of electricity for 7.5p/kWh between 00:30 - 04:30, with a standing charge of 48.26p/day.
  • OVO Drive + Anytime
    This bundle tariff takes a slightly different approach to reducing off-peak cost. Over the course of a month, a household's electricity is charged at the normal rate of an OVO energy deal. Then, on the first of the month, credits are added to the account depending on how much electricity was used to smart charge an EV. This credit system ensures that each month, the bill equates to an EV charging rate of 5p/kWh.

Why has the energy price cap risen again?

The price households pay for each unit of gas and electricity, is wholly determined by the wholesale cost an energy provider originally buys it for.

It's an incredibly volatile market. The invasion of Ukraine also brought into sharp focus how reliant Western countries are on the supply of Russian gas. In 2021, around two-fifths of the EU's gas was imported from Russia. Once sanctions were put in place following the February 2022 invasion, Europe and America began having to invest in alternate sources of gas and infrastructure, as the Russian state essentially turned off the tap to Europe.

Additionally, due to knock-on effects of the pandemic, domestic gas and electricity stores were depleted more than usual towards the end of the winter in 2021. This exacerbated the reliance on importing our energy and drove the wholesale cost up.

That extra cost is then passed onto the average household, resulting in the dramatic rise in monthly bills the country is currently experiencing. Moving forward, the government will provide £400 of support per household - an automatic monthly credit of £66 or £67 between October 2022 and March 2023.

What about renewable energy?

Due to the financial structure of the energy industry, the price of electricity (even green, renewable electricity) is almost wholly set by the price of gas.

In the UK, there is a wholesale price for electricity, regardless of its production. So, even if you're with a provider that powers your home using renewable energy, it still has to pay for renewable certificates that inflate the price up to the market rate of gas. Older wind farms for example, charge retailers a 'renewable obligation certificate', the cost of which is then passed on to the consumer. That system is changing with newly built wind farms via the introduction of 'contracts for differences', fixing the rate of the power provided.

Certain energy suppliers are campaigning to change this. By reshaping the structure linking renewable energy and traditional power stations, the cost for the consumer will be driven down and bolster the UK's efforts to achieve net zero.

Will the increasing price cap affect EV uptake in the UK?

We don't have a crystal ball, but we do loveelectric and believe switching to electric vehicles is the future of motoring. Especially if the UK is to hit its net zero targets by 2050.

It may seem like everyone has been talking about electric cars for years, but there's only been a vast influx of registrations since 2020.

In 2019, only 37,850 electric vehicles were newly registered in the UK. By 2020, that number had almost tripled to 108,000 registrations. The following year, another 191,000 EVs put rubber to the road.

These numbers reflect a huge gain in market share for pure electric vehicles, squeezing out diesel vehicles and taking a chunk of the petrol-powered market.

For comparison, by the end of July 2021, there were 101,870 new diesels on the road for that year. By the end of July 2022, that number was down 48.7% to 52,238. Petrol vehicles fared slightly better during the same dates, but still saw a dramatic drop of 19.2% - 497,833 in July '21, down to 402,468 in July '22.

How about pure electric vehicles? By the end of July 2021, just over 85,000 BEVs had been registered that year. Come the end of July 2022, that figure had risen to 127,492 registrations - a 49.9% increase compared to the year prior.

Consider the exponential growth of electric vehicle uptake in the context of global events.

Supply chains are still vastly reduced compared to their pre-pandemic capacity. Energy bills are the highest they've ever been. Yet still, BEV registrations continue to grow year on year.

What's the most affordable way to get an electric vehicle?

One of the largest barriers to entry for an electric vehicle is the sticker-price cost. We know. In fact it's why loveelectric was started in the first place. There's no getting around the fact that these are cutting-edge vehicles, packed with industry-leading tech developed from huge research and development budgets. EVs simply cost more to build.

With purchasing outright out of the question for most people, HP or PCP still presents a large monthly cost. Personal leasing is the next most sensible option, but also requires a large deposit at the beginning of the term.

Salary sacrifice

But there is another way. Salary sacrifice; the most accessible and affordable way to get behind the wheel of an electric vehicle. There's no deposit required and can be 50% cheaper than leasing.

An EV salary sacrifice scheme is a great way for employers to offer unrivalled value to their employees. It is cost neutral for the company, helps retain the most valuable team members and bolsters green credentials.

There's a lot to consider when it comes to salary sacrifice. Whether you're an employee or employer, and finding the best scheme to fit may seem like a daunting task. Our guide to the best salary sacrifice schemes delves into the nuances of all that's on offer, providing as much information for employees and companies alike.

The electric vehicle revolution is fully underway, why not take a look at all the reasons to loveelectric?

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Appendix 1 | UPDATE 1: Liz Truss announces a £2,500 freeze on the average annual household energy bill

The UK’s newly appointed Prime Minister - Liz Truss - has announced an energy bill price freeze. Here is a brief rundown of what this means for the average household over the next two years:

  • Average cost of electricity will be 34p/kWh
  • The average household energy bill will rise from £1,971 to £2,500
  • Price freeze will come into effect on October 1st 2022
  • Prices will stay frozen for two years; until 2024
  • It supersedes any subsequent Ofgem price cap announcements. 

Under the proposed price cap, the average annual energy bill was set to cost £3,549 - this price freeze should save most households around £1,000 per annum for the next two years.

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Appendix 2 | UPDATE 2: Jeremy Hunt announces bill freeze U-Turn (October 2022)

The energy price cap previously announced by Liz Truss will now only remain in effect until April 2023. 

In a press statement, Jeremy Hunt has announced that Truss’ latest economic policy that promised the average household to keep its energy bills under £2,500, will only be in place until April 2023.

To prepare for April 2023 and beyond, Hunt has announced “a Treasury-led review into how we support energy bills beyond April next year. The objective is to design a new approach that will cost the taxpayer significantly less than planned whilst ensuring enough support for those in need…the new approach will better incentivise energy efficiency.”

We'll be sure to update this blog in April 2023 to keep you updated with the latest electricity prices.

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