The hi-tech solution to soaring energy costs bills

The announcement of record profits on Thursday by Centrica, the owner of British Gas, prompted further anger among hard-up families who have just seen their energy bills increased by 7 per cent by the firm.

British Gas isn't the only villain, of course. Since December all the major suppliers have increased prices – by up to 9 per cent for electricity and 9.4 per cent for gas.

The energy watchdog, Ofgem, is not taking the latest increases lightly and is expected to insist on the introduction of a basic tariff in a report due in March which protects against unexpected price hikes. However the tariff is likely to be fixed at a higher rate than a lot of online deals.

It means the onus to cut bills falls back on consumers. There are several easy ways to cut electricity consumption. For instance, using devices to take TVs and home entertainment systems out of standby mode could save up to £40 a year – not bad for an average £12 investment. Computers, game consoles and even mobile phone chargers left on will cost the unwary consumer upwards of £60 a year. Switching off lights, using low-energy lighting and only boiling the water you need in a kettle are other ways of cutting bills.

But when it comes to gas the choice of energy-saving products is limited, even though the amount we spend on gas is substantially more than we do on electricity (£608 on the annual gas bill compared with £424 on electricity, according to Ofgem). The amount we're spending on gas is also climbing. Figures from the Department of Energy and Climate Change show expenditure on gas rose from 1.9 per cent to 2 per cent of consumers' expenditure in 2009, while spend on electricity climbed from 1.6 per cent to 1.7 per cent.

Loft and cavity wall insulation, and the installation of an energy-efficient boiler, can help reduce gas consumption but such improvements are expensive and only have long-term gain.

However, there are savings to be made. The most obvious starting point is to look at your bills: could you save money by switching to another supplier? Tom McLennan, head of switching at Which? says: "The most economical solution to switching is a dual fuel tariff tie-up between energy sources."

Ofgem has ruled that energy suppliers should provide a 12-month statement to help customers switch, however, only a third of people have claimed to have received one, with a large proportion of those claiming they were too complex. However, McLennan argues they remain important. "It's advisable to take a 12-month view as quite large cost distortions appear at both peaks if you take the summer low and winter highs. You should also pay by direct debit to reduce costs," he says.

Surprisingly, the solution to ever-growing gas bills could depend upon electricity – or, more acucrately, microgeneration. This involves householders installing technology that generates electricity to fulfil their own requirements, with any surplus electricity being sold on to the national grid generating 10p for every kilowatt-hour under the Government's Feed-In Tariff Scheme. The revenue can then be used to offset the household gas bill.

Such is the perceived importance of microgeneration that Sainsbury's has recently signed a five-year partnership with British Gas to sell such services to their customers.

Current technologies include combined heat and power (CHP) appliances such as boilers – which use heat wastage to generate electricity – wind turbines and solar panels. But with the latter costing upwards of £7,500 the investment is not cheap.

In June of this year the Renewable Heat Initiative will come into effect where consumers install renewable heat systems – for which grants are available – such as solar thermal panels, heat pumps or biomass (wood burning) boilers. An estimate is made about how much heat the renewable energy systems will produce and a fixed payment is then made based on that estimate.

"Renewables or microgeneration could be a good investment, with feed-in tariffs potentially generating 10-15 per cent tax free," says Adrian Wright of Enact Energy Renewables. "And while the costs could be added to a mortgage, it won't be long before large investment companies offer funding."

There are likely to be more finance deals appearing before the Government's proposed launch of its Green Deal in 2012. The ambitious project intends to give individuals the opportunity to spend up to £6,500 on improving the energy efficiency of their home, without means-testing or credit checking. On top of that the 'loan' will be passed onto the next owner should the house be sold.