As the UK plots a course to its 2050 net-zero target, attention is on the evolving energy market and the transition to a smarter system. Agile time-of-use-tariffs have made their way onto the market in recent years, with some electric vehicle (EV) customers being paid to charge their vehicles when there is excess renewable power on the system.
Yet there are concerns that the benefits from these innovative new tariffs, and technology such as EVs and solar panels are disproportionately reaped by affluent “prosumers”. Some industry observers believe there is potential for the market to splinter, with vulnerable customers being left behind in this smart revolution.
“We have to ensure that all consumers benefit from a smarter energy system, not just the tech-savvy prosumers who drive EVs, or have solar panels, and in doing so avoid a ‘two-tier’ market developing”, Simon Virley, partner and head of energy and natural resources at KPMG UK tells Utility Week.
Virley’s view is shared by Ryan Thompson, a partner at Baringa Partners. He believes the challenger brands at the heart of much of the innovation in the market are not that interested in attracting vulnerable customers, who are likely to come with bigger costs to serve.
“You have customers who are proactively engaged, they are tech savvy and have the ability to seek out the best deals and take advantage of decarbonising their house and fundamentally reducing their energy bills.
“Then you definitely have the more vulnerable customers, the fuel poor that unfortunately generally cost more to serve as well. They’re obviously not the ones that newer suppliers are targeting either. There’s a danger that the incumbent suppliers are left with the legacy customer base that potentially cost a bit more to serve and are certainly harder to serve and provide the extra support those customers need.”
Furthermore, he adds, the introduction of the price cap on default tariffs has pushed many suppliers into a situation where lowering costs becomes the main driver of strategy.
“Fundamentally the price cap rewards low cost and so the best investment that most suppliers can make is reducing their cost base. It’s hard to see how that changes while the system is driven towards an overall lower cost. It is fundamentally the right direction, you want to take any wastage out of the system, but at the same time how do you protect all customers and ensure that all are treated equally and fairly in that process?”
Tom Steward, senior policy manager at Good Energy, agrees that no customers should be left behind and believes engaging the public is central to ensuring this.
He says: “We need a clean energy system that works for everyone, including those who aren’t tech-savvy. The best way to deliver this future is two-fold; a strong public engagement campaign from trusted organisations; and increased delivery of energy efficiency and solar PV measures.
“These technologies are simple and have a huge positive impact on energy bills. Furthermore, as more renewables come onto the grid, the cheaper the overall system will become; this is good for everyone, whilst also creating even more consumer-benefit from time of use tariffs.”
Engaging the public to encourage them to adopt new technologies is a goal shared by Energy UK’s chief executive Emma Pinchbeck. In a recent interview with Utility Week, Pinchbeck stressed the need for effective communications during the energy transition.
The trade body chief is not convinced that a two-tier market is developing and adds that both new challenger suppliers and the incumbents supply a mix of customers. She instead points to the fact that the sector is pushing for a “just transition” so that the post-pandemic green recovery reaches all sectors of society.
“I certainly don’t see a two tier system yet, what I would say is that we’re very mindful of this idea of the ‘just transition’ at Energy UK and we’re doing some work on how we make sure that the green recovery does deliver right across the country.”
Pinchbeck adds that the sector is trying to “spread the wealth” in terms of new energy services and flexibility markets.
“We really want to make sure that these energy markets are as open and as competitive as possible, that they allow us to do new and interesting things because that breadth will allow us to reach more consumers at least cost”, she says.