Ofgem will raise the energy price cap to £1,850 from July, a 13% jump that adds £213 to a typical annual bill. This is the second increase in six months and the highest summer cap since the crisis of 2022. For the 28 million households on standard variable tariffs, the arithmetic is brutal: every kilowatt-hour of gas and electricity now costs more than it did in April.
The new figure, as reported by Solar Power Portal, shows a grim reality: the price cap is no longer a ceiling of stability but a floor for rising costs. Wholesale gas prices, network charges, and policy costs are all climbing. The regulator’s own data shows that network costs alone will rise by £24 per household this year.
Who pays, and who saves
Every household on a standard variable tariff pays the cap rate. But the real pain is uneven. A typical 3-bed semi using 12,000 kWh of gas and 2,900 kWh of electricity will see its annual bill climb from £1,637 to £1,850. A draughty Victorian terrace using 18,000 kWh could face a bill above £2,400. The difference is largely down to the building fabric, walls, windows, roof, and how efficiently it holds heat.
Energy Saving Trust data says a home with an EPC rating of A uses roughly 40% less energy than one rated D. That gap is now worth about £740 a year. For a household in a D-rated property, the price cap increase alone adds £213. The upgrade from D to C, cavity wall insulation, loft top-up, double glazing, can cut bills by £300–£400 a year, according to typical installer estimates. The maths has never been clearer.
What this means for solar and heat pumps
The cap rise tilts the economics of solar panels further in the homeowner’s favour. A typical 4 kWp system on a south-facing roof in southern England generates around 3,400 kWh a year. At the new cap rate of roughly 27p per kWh for electricity, that’s £918 of generation. Even after accounting for export and self-consumption patterns, the average saving is £400–£600 a year, according to industry data from the Microgeneration Certification Scheme. Payback periods, which sat at 12–15 years under the old cap, now shrink to 10–13 years.
Heat pumps also become more attractive. A typical air-source heat pump with a seasonal coefficient of performance of 3.5 delivers heat at about 8–10p per kWh, roughly half the cost of gas at the new cap rate. The Boiler Upgrade Scheme offers a £7,500 grant, but applications are limited. Government figures show just 40,000 heat pump installations in 2024, against a target of 600,000 by 2028. The cap rise may accelerate demand, but installers remain scarce.
But there is a catch. The cap rise is partly driven by higher policy costs, including the costs of renewable subsidies and network upgrades. Households that install solar or heat pumps reduce their own consumption but still pay those policy costs through standing charges. The standing charge alone, which covers fixed network and policy costs, is set to rise to about 60p per day for electricity and 30p for gas, roughly £330 a year before using a single unit.
What to do before October
Households on standard variable tariffs can switch to a fixed deal, but the market is thin. The cheapest fixes are currently around £1,780, barely below the cap. The real opportunity is demand reduction. Every kilowatt-hour saved is now worth 13% more than it was in April.
Start with the fabric: loft insulation costs £300–£500 to install and saves £200–£300 a year, according to the Energy Saving Trust. Cavity wall insulation costs £500–£1,000 and saves £300–£400. Draught-proofing costs £100–£200 and saves £50–£100. These upgrades improve an EPC rating by one or two bands, which also raises the property’s value by 2–5%, according to Nationwide data.
Solar panels and heat pumps are longer-term bets, but the cap increase shortens the payback window. The government’s Smart Export Guarantee pays 15–20p per kWh for exported solar electricity. Combined with the savings from self-consumption, a solar system can now save £600–£800 a year by 2026 if cap rates stay elevated. The key is to act before the next cap announcement in October, which could push rates even higher.
Households on standard variable tariffs should apply for loft and cavity wall insulation through the Great British Insulation Scheme, which offers free or subsidised installation for low-income homes. Others can use the Energy Company Obligation (ECO4) scheme. Applications are open now. The cap rise is locked in for July, but the savings from upgrades start from the day the work is done.
Frequently Asked Questions
A typical household using 12,000 kWh of gas and 2,900 kWh of electricity will see its annual bill rise from £1,637 to £1,850, an increase of £213. Actual costs depend on your property size, energy use, and tariff.
Yes. A 4 kWp solar system can save £400–£600 a year under the new cap, with payback in 10–13 years. The Smart Export Guarantee pays 15–20p per kWh for exported electricity, further improving returns.
