Energy Systems Catapult (ESC) has called on energy retailers to evolve in order to support customers transitioning away from fossil fuels and into a net zero energy system.
According to the ESC, energy retailers must move away from maximising the sale of kWh to help both the UK and its customers to incorporate low-carbon technologies on the path to net zero emissions.
This is detailed within the independent report Clean Energy Retail – The Role of Clean Energy Retailers in the Net Zero Transition by Energy Systems Catapult and supported by OVO Energy.
The report states that customers should be supported in retrofitting residential homes with low-carbon technologies, integrate clean transportation options and also provide flexibility to the energy system.
ESC previously stated the UK must increase low-carbon heating installations by 40-fold to reach net zero targets. This would be needed to ensure the nation’s 30 million homes are switched to low carbon heating over the next 30 years.
As well as this, the report also found that the ambition of energy retailers would be stifled without policy and regulatory reforms that incentivise low-carbon choices and new innovations. To help navigate this, the report has suggested what policy reforms should focus on.
The first recommendation calls for incentivisation of low-carbon technologies enabling energy retailers to develop offers that attract people to technologies that can contribute to the energy transition.
The ESC notes a faster rollout of smart meters will be crucial however wider reform will be needed to sharpen wholesale price signals market-wide with half-hourly settlements and strengthen green tariff frameworks.
Alongside this, the report finds improving customer experience and competition metrics should be a key aspect of policy reforms. It states that making low-carbon energy options simple and easy for customers to navigate could be crucial in move towards net zero emissions whilst maintaining trust.
In doing so, the ESC believes simplifying customer experience and improving data access, redefining the roles of energy retailers and improving the way firms measure retail competition will also be critical in its success.
The final policy reform recommendation with the report is a call for support measures for innovation, vulnerable households and a just transition. Ensuring a transition can be achieved by all across the UK will be critical and was a key discussion point for global leaders at COP.
To support this, the report argues that consumer protection measures must be updated and move with the times to continue to look after consumer interests alongside smarter approaches to tackle fuel poverty.
“The next phase of the net zero transition is going to require energy retailers that can make that transition as easy and as cheap as possible for customers,” said Guy Newey, chief executive of independent innovation centre at Energy Systems Catapult.
“This presents a once-in-a-generation innovation opportunity for energy suppliers to harness the potential of new digital and clean technologies to create better consumer offerings – whether that is improving household energy efficiency or installing new tech which can protect consumers against future price volatility.
“Ensuring households and businesses benefit from this opportunity will require them to build trusted and enduring relationships.”
As stated by Newey and detailed within the report, energy retailers must build trust and strengthen relationships with customers alongside developing new propositions. These must focus on consumer outcomes, low carbon products and services, vulnerable households, financial and tariffs.
Energy retailers will need to consider new strategies, business models and partnerships; educating customers on their net zero journey, embracing digital developments and boosting skills and capabilities, suggests the report.
“Whilst we work with government and industry to develop an immediate solution to support households, we must not lose focus on the longer-term measures that will create a greener, more flexible energy system including installing energy efficiency measures, decoupling electricity from gas and creating innovative products to help engage our customers with their energy usage,” said Raman Bhatia, CEO of OVO Energy.
“Our teams are working hard to decarbonise homes across the UK while ensuring we don’t leave anyone behind on the journey to net zero.”
A report released by the ESC in April observed the operability of a net zero system in a bid to “generate conversation and debate” highlighting key parameters that make up system operation.
It found that in a net zero power system, flexible demand could be shifted to meet available renewable generation rather than the current system of dispatching generation to meet demand.
Additionally, as a net zero system will no longer have access to bulk stored energy in the form of fossil fuels, security of supply will need to be achieved by alternative sources. The latest report calls on further action to support growth across the UK’s low-carbon sector.
