The government announced a significant energy package today covering electricity pricing reform, clean power acceleration, and practical changes to BUS that make it easier to switch away from fossil fuel heating. If you are on oil or LPG, one change is worth acting on now. The broader reforms will take years, but the direction is right.
There has been a lot of government energy news today. Some of it will genuinely affect your bills. Some of it is longer term. Here is an honest breakdown of what was actually announced, what it means in plain English, and what you should do about it.
Check out Adam's reaction to the announcements on the day.
The Big One: Why Your Electricity Bill Tracks Gas Prices
Before getting into the announcements, it helps to understand the problem they are trying to fix.
When you look at your electricity bill, you might assume the price reflects how electricity is generated. The UK generates a lot of electricity from wind and solar now. Those have no fossil fuel cost. So electricity should be getting cheaper, right?
Not necessarily. The UK wholesale electricity market works on a principle called marginal pricing. Every half hour, the grid needs to balance supply and demand. It calls on the cheapest generators first. Wind and solar go to the top of the queue. But when demand exceeds what renewables can supply, gas plants fill the gap. And in the UK's current market, whoever is last in the queue to supply sets the price for everyone, including the wind farms that were already running.
So a gas plant running at 3pm on a cold Tuesday sets the electricity price for that half hour. The wind farms get paid that gas price too. When gas is cheap, that is fine. When a war in the Middle East pushes gas prices up, your electricity bill goes with it, even if the electricity going into your home came from a wind turbine.
This is not a quirk or an oversight. It was designed this way. But it means every global gas crisis becomes a UK household energy crisis, regardless of how much clean power we have built.
Energy Secretary Ed Miliband put it plainly today: the era of fossil fuel security is over. Today's full announcement from the Department for Energy Security and Net Zero is the government's attempt to do something structural about it.
What the Government Is Actually Doing About It
Locking in Fixed Prices for Old Renewables
About 30% of UK electricity comes from wind and solar farms built under an older government scheme called the Renewables Obligation. These generators do not have a fixed price for their electricity. They get the gas-linked wholesale price, which means when gas spikes, they get a windfall. When gas falls, their revenue drops.
The government is offering these generators a new voluntary deal: lock in a fixed price instead. Stop riding the gas rollercoaster. In exchange, consumers get more of the electricity supply shielded from gas price shocks.
This is genuinely meaningful if it works. It is voluntary though, and the formal sign-up process does not run until 2027. This is a long game, not an immediate fix.
Taxing Windfall Profits Right Now
While the longer-term fix plays out, the government is immediately raising a tax called the Electricity Generator Levy from 45% to 55%. This captures more of the extra profit generators make when gas prices spike. The money goes to support households with bills.
Think of it as the government saying: you are benefiting from a crisis that is hurting ordinary people, so you are going to hand more of that back.
What This Means for Your Bills
Not much in the next few months. The structural changes take time. But over the next two to three years, as more generators move onto fixed-price contracts and less of the UK's power is priced by gas, electricity should become cheaper and more stable relative to where it sits today.
That matters a lot for heat pumps. The main objection people raise about switching from gas is that electricity is expensive to run a heat pump on. That objection gets weaker every year the grid gets cleaner and the electricity market gets reformed.
More Clean Power, Faster
The government is doubling down on its target of clean power by 2030. The next big renewables auction has been brought forward to this summer. A few other things in this section worth knowing:
Public land: The government is opening up MOD sites, industrial land and railway land for solar panels and wind turbines. Even using a fraction of it could deliver 10 gigawatts of new capacity, enough to power around 5 million homes. This matters because it bypasses the planning battles that slow conventional projects down.
Grid upgrades: One of the least-discussed but most important bottlenecks in UK energy is the grid itself. Building a wind farm is one thing. Connecting it so the electricity can actually reach homes is another. New rules for substation upgrades should help speed that up.
Heat pump factories: £90 million to build and expand heat pump manufacturing in the UK, creating around 2,000 jobs. A further £30 million to develop smaller, cheaper, easier-to-install models. The cost of heat pumps is still a barrier for many households. UK manufacturing investment is one way to bring that down.
Schools solar: Great British Energy will fund rooftop solar on a further 100 schools and colleges this year. Up to £40 million. Not a big number in the context of the UK's energy system, but schools that see their bills fall become advocates for clean energy, which matters.
Making It Easier to Switch
The Oil and LPG BUS Grant Increase
This is the most immediately useful change in the whole announcement and it applies to a specific group: homeowners heated by oil or LPG rather than mains gas.
If that is you, the government grant available to help you install a heat pump (BUS or Boiler Upgrade Scheme) has just gone up from £7,500 to £9,000. That is the biggest grant ever offered under the scheme.
Why specifically oil and LPG? Because those households have no price cap protection. When global energy markets spike, they take the full hit. There is no Ofgem mechanism shielding them. The government has recognised that and responded directly.
The new rate is expected to come into effect in July 2026. A formal notice will confirm the exact date on GOV.UK.
There is a useful timing detail here. Heat pump installations can be commissioned up to 120 days before the BUS voucher application is submitted. So if you get a heat pump installed in the next few months, you may still be able to claim the higher £9,000 rate when it goes live in July, provided your installation falls within that window. If you already have a grant voucher in place, you can also withdraw it and reapply at the higher rate once it is live. Check with your installer before doing anything!
Properties on mains gas are unaffected. Their grant stays at £7,500.
Planning Changes for Heat Pumps
Currently, most heat pump installations in England and Wales do not need planning permission, but there are restrictions on where outdoor units can go and flats are often excluded entirely. The government is consulting this summer on relaxing those restrictions and making installations easier in flats and non-domestic buildings.
This is a consultation rather than a confirmed change, so the actual impact is at least 12 to 18 months away. But it is the right problem to address. A lot of people who want a heat pump currently cannot get one because of where they live, not because of their home itself.
EVs and Charging
New permitted development rights for EV home charging are being legislated this summer. This primarily helps renters and people without driveways, who currently face real barriers to home charging. A right-to-charge consultation follows, aiming to give leaseholders a formal route to request a charge point.
Who Should Actually Do Something Today
If you are on oil or LPG: The case for switching to a heat pump is stronger today than it has been at any point in the last three years. High fuel prices, a £9,000 grant coming, and a 120-day installation window that means you may not need to wait until July. This is worth looking into now.
If you are on mains gas: The announcement is good news in the medium term. Electricity pricing reform will gradually make heat pumps cheaper to run. The grant stays at £7,500. Whether switching makes sense depends on your specific home and circumstances, and that has not changed today.
Either way, the quality of the installation matters more than almost anything else. A well-designed heat pump in the right home costs less to run than an oil boiler. A poorly designed one does not. Find out what a proper Heat Geek design consultation involves.
The £9,000 BUS grant for oil and LPG properties is expected in July 2026. The exact date will be confirmed in a Grant Change Notice on GOV.UK. All other grant amounts correct as of April 2026. Full Press Release here.
