FIRE and Energy costs

Nobody really likes paying their bills- be honest now, do you really like all those direct debits (or credit card payments) that go out of your account every month (or year)?. Nobody really does, especially when on the route to FIRE you want to reduce your outgoings- as it has a two-fold effect. You both reduce the amount you spend (so require a lower FIRE number x25/33) and you also keep that money to invest and reach your FIRE number faster.

Energy costs have gone through the roof recently

I’m not going to talk about the why (many others already have)- and it’s a number of factors that you or I have literally zero control over. Unless you happen to own some Russian gas lines etc etc. The sad reality is that this is just one of many many things that we have very little control over. You also can’t control your council tax bill, your car insurance costs, home insurance, etc etc. But yet- you have some control over these- when you pick the house you live in (rent of buy) you are signing up for that council tax bill- sure it might go up, but the band you are in is likely never to change.

Energy costs are the same thing. Firstly you have the age-old choice of going for a variable rate, or fixed rate (much like your mortgage payments). Both have their advantages and disadvantages- fixed setting a higher base rate of cost- but then not changing for the length of the contract – 1 or 2 years is very standard. Variable (should) get you the lowest cost, but with the possibility that the price might raise whenever the wholesale/other prices rise too. Secondly- you “choose” how much you use. You aren’t forced to have lighting/heating or all the other technology or other things you might have at home- everyone is a choice that then uses electricity/gas/oil that you then pay for. So start thinking efficiently- turn off/or get rid of things you aren’t using. Especially things that are left on/on standby that just aren’t getting use (as well as the potential of realising cost from these too).

Think for the long term

There isn’t much you can do today that will change the energy tariff that you are on I’m afraid- most of the energy companies aren’t taking on any new customers now. Due to the way that they hedge and the price cap they are allowed to charge customers, if they took anybody new on- it would be at a loss. Nobody knows what the energy prices might do next, so it’s not like they can bare short term pain for a long term gain- these prices might stay around for another year at least.

But there are thing you can do if you think a bit further than today:

  • Install solar panels, I’ve written on the subject before. But for an outlay of approx £4-5000, you can cover about 40% of your electricity costs, pretty much forever. You can even sell the excess energy to the grid for 5.5p per unit as well.
  • Insulate your house. Much of the UK housing stock has very poor insulation, and it’s a very cheap (especially if you do it yourself) fix to get a warmer house without any additional heating costs (or lower your current costs).
  • Install Air Source Heat Pump (ASHP) instead of your gas boiler. These use electricity instead, and whilst electricity costs are high at the moment- this is actually due to the gas price rather than electricity. With overnight rates incredibly cheap- you can actually heat you house cheaper than gas.
  • Get a smart meter installed- all the newer/better tariffs will be “time of use”, and will require a smart meter to be installed. Octopus Go was offering electricity for 5p a unit for 4 hours overnight. Perfect for high use energy appliances/electric cars etc.
  • Next time you buy energy intensive appliances (such as washing machine/dish washer etc) look for the energy ratings and go for at least A+ or above. These will save you in the long run
  • Ensure that you keep switching to the provider that offers the best rate for your usage. Whilst a bit of a pain- it can easily save you £300 in the first year if you have never switched before, then usually at least £100 a year ongoing. Especially if you can get referred by a friend, as many companies pay out £50 to each person.
  • Invest in other energy sources (especially if you can’t get solar panels installed)- there are many options to do this from solar/wind funds, to individual wind farm projects run as community benefits.

Conclusion

Bills are a fact of life- but reducing them to FIRE earlier is how it’s played. Do remember that FIRE is all about playing the long game- doing all of the points above isn’t going to get your FIRE’d in a year. But it might take a year off the plan that you had before.

The energy market is (slowly) changing- with companies like Octopus Energy pushing what is “standard” and asking for the market to change. It’s not long before we are going to see things like mini-grids (selling energy to your neighbour), ability to sell energy back to the grid easily (on demand even from electric cars), all the way through to “enforced” smart metering…. One thing is for sure- the future is green!

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