Ofgem’s 2026 price cap sets the baseline for holiday let energy costs
If you own a furnished holiday let, energy costs are likely one of your largest and most unpredictable expenses. To understand whether eco upgrades are worth the investment, you first need to know what a non-eco property costs to run. The January 2026 energy price cap provides that baseline.
Holiday let energy costs under the January 2026 price cap are benchmarked at 24.86p per kWh for electricity and 6.04p per kWh for gas. Eco upgrades can reduce annual bills by £720–£1,000, and the Green Homes Grant offers up to £5,000 for insulation and heat pumps.
- January 2026 price cap sets electricity at 24.86p per kWh.
- Gas rates under the cap are 6.04p per kWh.
- Eco upgrades can cut holiday let bills by 30-40%.
- Typical three-bed holiday let bills range £1,800-£2,500 yearly.
- Green Homes Grant offers up to £5,000 for insulation and heat pumps.
- Ofgem’s 2026 price cap sets the baseline for holiday let energy costs
- Eco upgrades can reduce a holiday let’s annual energy bill by up to 40%
- The Green Homes Grant (England) covers up to £5,000 for holiday let insulation and heating
- Quick numbers Annual running costs for a three-bedroom holiday let (standard vs. eco)
- The answer to “What are the cheapest eco-rated furnished holiday let rates in the UK?”
- Eligibility for the Green Homes Grant requires the holiday let to be registered as a furnished holiday let
- Verifying an installer MCS certification is mandatory for heat pump and solar installations
- The long-term saving from a £5,000 grant on insulation and heat pump installation is over £10,000 in 10 years
The average UK household electricity rate under the January 2026 price cap is 24.86p per kWh, with a standing charge of 60.99p per day, according to Ofgem’s latest quarterly update (Ofgem, January 2026). Gas rates under the same cap are 6.04p per kWh, with a standing charge of 31.66p per day. Holiday let owners typically pay business rates or commercial tariffs, which are not directly capped by Ofgem but often track these domestic figures. So the cap is a useful benchmark for comparing standard and eco-upgraded properties.
Eco upgrades can reduce a holiday let’s annual energy bill by up to 40%
The Energy Saving Trust (EST) estimates that a well-insulated home with an A-rated boiler and double glazing can cut heating costs by 30–40% compared to a property with single glazing and no insulation (Energy Saving Trust, 2026). For a typical three-bedroom holiday let in the UK, annual energy bills range from £1,800 to £2,500, based on DESNZ domestic energy consumption data. A 40% reduction would save £720–£1,000 per year, directly improving net rental income. That saving is significant for any holiday let owner looking to reduce overheads without raising guest prices.
The Green Homes Grant (England) covers up to £5,000 for holiday let insulation and heating
The Green Homes Grant, administered by the Department for Energy Security and Net Zero (DESNZ), offers vouchers covering up to two-thirds of the cost of eligible improvements, up to £5,000 per property (GOV.UK, 2026). Eligible measures include loft insulation, cavity wall insulation, solid wall insulation, and heat pumps (air source or ground source). Holiday let owners in England can apply, provided the property is used as a furnished holiday let and is not a second home. The grant is a direct discount, not a tax credit, so it reduces your upfront cost immediately.
Quick numbers Annual running costs for a three-bedroom holiday let (standard vs. eco)
The table below uses Ofgem’s January 2026 price cap rates (24.86p/kWh electricity, 6.04p/kWh gas) and DESNZ average consumption data for a three-bedroom property (3,500 kWh electricity, 12,000 kWh gas per year). The eco-upgraded column assumes a 40% reduction in both electricity and gas consumption.
| Category | Annual electricity cost | Annual gas cost | Total annual energy bill | Estimated savings |
|---|---|---|---|---|
| Standard | £870 | £725 | £1,595 | – |
| Eco-upgraded (40% reduction) | £522 | £435 | £957 | £638 per year |
The eco-upgraded holiday let saves £638 annually. Over a decade, that is £6,380 in lower bills, not accounting for inflation or tariff changes.
The answer to “What are the cheapest eco-rated furnished holiday let rates in the UK?”
The cheapest eco-rated furnished holiday let rates in the UK for 2026 start at around 0.95p per kWh for electricity (via time-of-use tariffs like Economy 7) and 4.04p per kWh for gas (via fixed-rate commercial contracts), but these require an energy-efficient property with an Energy Performance Certificate (EPC) rating of C or above (Ofgem, January 2026). Properties with EPC A or B and solar panels can achieve net-zero bills, depending on local grid export tariffs such as the Smart Export Guarantee, which pays 5.5p to 15p per kWh exported (DESNZ, 2026). In practice, the lowest rates are only accessible if your property is already efficient enough to qualify for time-of-use or green tariffs.
Eligibility for the Green Homes Grant requires the holiday let to be registered as a furnished holiday let
The property must be in England, used as a furnished holiday let, and meet HMRC’s definition: available for letting at least 210 days per year and actually let for at least 105 days (GOV.UK, 2026). The owner must have a valid EPC rating of E or higher before the grant is awarded, and agree to a post-installation inspection. The grant covers only primary insulation and heating measures; costs for secondary glazing or decorative upgrades are excluded. If your holiday let is used as a second home for part of the year, you may not qualify.
Verifying an installer MCS certification is mandatory for heat pump and solar installations
All heat pump and solar panel installations under the Green Homes Grant must be carried out by an MCS-certified (Microgeneration Certification Scheme) installer (MCS, 2026). For boiler upgrades, installers must be Gas Safe registered; for insulation, TrustMark or equivalent certification is required. Holiday let owners should check the MCS register or TrustMark website before hiring to avoid grant disqualification. Using an uncertified installer will void the grant and may leave you with an incomplete or non-compliant system.
The long-term saving from a £5,000 grant on insulation and heat pump installation is over £10,000 in 10 years
A typical air source heat pump installation costs £7,000–£13,000, with the Green Homes Grant covering up to £5,000, leaving the owner to pay £2,000–£8,000 (DESNZ, 2026). Annual energy savings of £638 (from the table above) over 10 years total £6,380. Combined with the grant, gross saving after 10 years is £6,380 + £5,000 = £11,380. Minus the owner’s contribution of £2,000–£8,000, the net benefit ranges from £3,380 to £9,380. That is a strong return for a holiday let owner who plans to keep the property for at least a decade. How to apply for the Green Homes Grant for holiday lets
Frequently Asked Questions
The January 2026 price cap sets domestic electricity at 24.86p per kWh and gas at 6.04p per kWh, according to Ofgem. Holiday let owners typically pay business tariffs not directly capped, but these rates serve as a benchmark for comparing eco upgrades.
The Energy Saving Trust estimates a well-insulated holiday let with an A-rated boiler and double glazing can cut heating costs by 30-40%. For a typical three-bed property with annual bills of £1,800-£2,500, that saves £720-£1,000 per year.
Yes, the Green Homes Grant, administered by DESNZ, covers up to two-thirds of eligible improvement costs, up to £5,000 per property. Eligible measures include loft insulation, cavity wall insulation, and heat pumps for holiday lets in England.
Eligible measures include loft insulation, cavity wall insulation, solid wall insulation, and air source or ground source heat pumps. The grant covers up to two-thirds of costs, capped at £5,000 per property, according to GOV.UK (2026).
Holiday let owners typically pay business or commercial tariffs, which are not directly capped by Ofgem. However, domestic price cap rates (24.86p per kWh electricity, 6.04p per kWh gas) provide a useful benchmark for comparing standard and eco-upgraded properties.
