Innovation in the tariff market: Discussion paper on how new tariffs can work better for people
Recent years have seen the introduction, and growth, of new and innovative tariffs in the electricity market, including tariffs designed for specific technologies like electric vehicles (EVs) or with smart-enabled time-of-use (TOU) pricing. In general, these tariffs make it cheaper for people to use electricity when there is less demand on the grid, or when the availability of renewable generation is high. Some smart-enabled tariffs also give people the opportunity to sell electricity back to the grid during periods of peak demand.
Alongside smart-enabled tariffs, there has been a recent increase in bundled products and services. This includes tariffs that offer the installation of an EV charger or a smart thermostat, or services such as EV free miles, where consumers are offered a number of miles as credit on their account or to use at public chargers.
Innovative energy tariffs and bundled options offer numerous potential benefits for consumers like lower prices, options that are tailored to their needs, or offers that simplify their experience. However, these offers also present new challenges.
People may find it difficult to compare these options and it could prove to be overwhelming. This could result in people choosing tariffs that are not suitable for their needs.
Public support will be essential as we transition to net zero and new tariff models are just one area where people will be expected to interact with energy in new ways. Much of our recent research has explored these changes, and their impact on consumers.
Alongside smart TOU tariffs, we expect to see the growth of other forms of domestic demand-side response (DSR), which will allow consumers to be ‘flexible’ with how and when they use energy. These products and services can offer consumer benefits, but there are also risks that the government will need to understand and anticipate. In many cases consumers will be expected to buy and install new smart appliances in their home, so it will be critical that we understand how we can help them to make informed choices about these products.
Access to data on how and when people use energy will be critical to enable new products and models. It is essential that people have control over how and why their data is being used, as well as who can see it. A data dashboard could increase consumer confidence when engaging with services derived from their data, and would also increase accountability for companies offering such services.
Our vision at Citizens Advice is of a future energy market that is inclusive by design and recognises the essential nature of energy supply. The future energy market should facilitate and encourage innovation, be accessible by all and treat everybody fairly, regardless of their circumstances. This means that everybody who wants to should be able to engage with smart-enabled tariffs, and be provided with the tools to support them in making the right decisions for them. In this report, we look at how the market is changing and what this innovation means.