Energy tariff pricing reform could encourage low carbon adoption

The Energy Systems Catapult and researchers at Oxford University say current prices distort market behaviour

By Jonny Bairstow

Reform of energy tariff pricing could encourage consumers to transition from gas boilers to low carbon heat pumps.

The Energy Systems Catapult, which is working in collaboration with researchers at Oxford University, suggests fixed charges added to energy bills to cover network, environmental and social costs may inadvertently distort market behaviour towards favouring investment in decentralised generation technologies such as solar and diesel, over demand technologies like heat pumps.

It says making energy pricing more reflective of the costs involved would improve the overall efficiency of the electricity system and reduce expenditure – the group’s research found different consumers pay different amounts for the same fixed costs of making energy supply available, because costs are recovered through the unit price.

The company believes re-balancing fixed and volumetric charges would recover fixed costs more fairly.

Power Systems Practice Manager at Energy Systems Catapult, Phil Lawton, said: “With heating and transport accounting for around two-thirds of UK carbon emissions, growth in heat pumps and electric vehicles will be important in meeting our 2050 targets.

“We need to make sure the way we charge for the fixed costs in the energy system reflects these exciting changes in technology and does not discourage consumers from taking them up.”