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What the global energy crisis means for UK energy consumption
Net Zero Nudge is a new podcast series exploring actions required to nudge consumer, government and industry behaviours in order to help the UK achieve its net zero target by 2050.
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The first episode of the brand new, six-part podcast series Net Zero Nudge explores how the global energy crisis and challenges around the cost of living will impact energy consumption patterns in the UK.
Simon Cox, Partner, Consulting, Energy & Resources, Ernst & Young LLP joins Matthew Wright, Head of Strategy at National Grid ESO, and Ed Reed, Editor at Energy Voice, for an insightful discussion around the following questions.
- How can we nudge consumer behaviour towards energy efficiency and lowering consumption?
- What are the opportunities to bring in demand-side flexibility to help reduce overall system costs for consumers?
- What does this mean for the overall sustainability agenda in the face of high inflation and rising cost of living?
Learn more about the Net Zero Nudge podcast series.
Podcast transcript: What the global energy crisis means for UK energy consumption
42 min approx | 27 October 2022
Speaker Key: Ed Reed, Matthew Wright, Simon CoxEd Reed
Hello and welcome to the first episode of Net Zero Nudge, a new podcast box set series by Energy Voice in association with Ernst & Young LLP. The UK government launched its 10-point plan for a green industrial revolution in the heady days of November 2020, and we looked through those plans in The 10 Point Pod, which serves as a nice forerunner to this Net Zero Nudge. Where The 10 Point Pod worked through those different areas sequentially, now we’re taking the next step. We’re looking at how to lead the conversation to nudge behaviour from consumers, government and industry to drive that shift to net zero.
I’m delighted to be joined by Simon Cox, an EY partner, and Matthew Wright, Head of Strategy and Regulation at National Grid ESO. In this first episode, we’re going to be looking at changing energy consumption patterns, which I think is really going to be critical to the entire discussion. Whilst there’s a temptation to think about innovating our way through the drive to cut emissions, we too often forget about ways in which we can change consumption to consume smarter and even to consume less. There’s a clear long-term imperative to this move with the government’s 2050 targets. They are legally binding, but there’s also a short-term interest.
The UK and, indeed, much of the world are looking at seemingly ever higher energy prices. Every day it seems there’s some new fresh strain on gas supplies, which has triggered a move to curb short-term consumption. The European Union, for instance, has called for its members to reduce gas demand by 15% going into winter, and it looks like there’s a broad agreement on that. The UK government has set out plans to cap prices for consumers and industry in a move that would be welcomed going into winter. It seems the need for such a move had become too pressing with the price increases moving from a niche topic to a major drag on the economy.
Whilst the price cap will help, consumers and industry will have to take steps to tackle consumption. Years of low prices have given something of a false sense of security, and those high-priced chickens are now coming home to roost. The trick’s going to be finding a way to combine this short-term move of reducing energy consumption, if only to tackle bills apart from anything else, into a longer-term reduction, looking at how to offer energy security, affordability and decarbonisation all at the same time.
Matthew, I’ll start with you. What role can changing consumption have on our lives and, indeed, the country’s future?
Matthew Wright
Great question. I think in the short term, your introduction covered it quite well. All of us at the moment are so conscious of the incredibly high energy prices. Anything that we can do to reduce consumption will save us money at the moment. So, all the energy efficiency advice we’ve maybe heard for years and maybe not done anything about, we need to start. And I think from a policy perspective going forward, energy efficiency is and should be the number-one tool. That’s about using less and costing less, and it’s a no-regrets thing.
But in terms of the longer term, even the medium term, there’s another aspect to this. Because our energy mix is changing, moving away from fossil fuel baseload plant that runs continuously to more flexible and intermittent renewable energy, we need to introduce flexibility into the demand side. We need to be able to move energy consumption between periods. This will be even more pronounced when we are all driving around in electric vehicles – and more particularly, if we heat our homes with electricity, heat pumps, etc.
To avoid significantly bigger peak demands on the system that will drive ever more investment, we need to unlock flexibility on the demand side to smooth that profile. And if we do that, the savings will materialise not only for those people that reduce their consumption and smart charge their EVs when the power is cheaper, but the overall level of cost on the total system will be less and the peak demand will be less, and that will benefit everybody.
Ed Reed
Simon, Matthew, has made an interesting point there about flexibility in consumption. How do you see it playing out?
Simon Cox
I think the chance to bring in demand-side flexibility to reduce the whole system cost for all consumers is an opportunity that we need to grasp. What I’ve found really interesting over the last few years is how the consumer’s role in that is starting to come through as a necessity and from consumer demand. If we think back 10 years in the energy supply market, it was all about cost, and convenience was the next most important feature in people’s behavioural decisions and purchasing decisions regarding energy. What’s been really interesting over the last few years is the rise of sustainability and the impact of climate change as being an increasing feature in people’s decision-making around energy.
People want to play a positive role in making the planet more sustainable and in abating the effects of climate change. That plays into the broader system thinking around flexibility. And for me, when I talk to people in the industry, that’s where the opportunity for innovation really lies. At all parts of the value chain and whether we’re talking about government intervention and market mechanisms down to what products and services companies put in front of consumers and businesses – there’s a rich opportunity that is exciting, interesting and needed. We won’t be successful if we don’t grasp it.
Reed
There’s quite an interesting combination, isn’t there, between sustainability and flexibility? To Matthew’s point about renewables really driving the changing shape of supply and the counterpoint to that being that question about sustainability. They’re tied together in quite a nice, virtuous circle. But, Simon, I’m going to stick with you for a moment. Considering how people can take advantage of this shift and are more interested in cutting emissions – with increasingly high prices, does this make that drive more important? Do high prices benefit the push into, for instance, solar panels on the roof or smart charging for the electric car?
Cox
I think in the very immediate term, it’s clear that what’s on the worry list of consumers is all about affordability. Two or three years ago, we might have spoken about the opportunities to provide certain services that would be more sustainable at a premium. I think that is less obvious now. As you said just a minute ago, Ed, this virtuous circle of sustainability, flexibility and energy efficiency is right there in front of us. There’s nothing cheaper than the megawatt you don’t use. So I think the opportunity for consumers to adopt some of those actions and behaviours that will reduce their energy bill today is there in front of them regarding insulation and so on and so forth.
In the medium term, the business case for those interventions requiring a bit of upfront outlay starts to look more interesting. When you’re thinking about the payback period on a solar and storage setup or the electrification of the way you heat your house or whatever it might be, it’s certainly true that if we’re looking down a period of sustained elevated energy prices, the business case for some of these interventions is going to make more and more sense.
Reed
Sure. And I think anecdotally; it does seem, speaking to a couple of friends who have been having trouble, the dream of having solar panels on the roof is obviously an attractive one, particularly at the moment. Still, it seems there’s a real squeeze on those supplies, doesn’t it?
Matthew, looking at that challenge of the short term versus medium term, going into winter, we’ve all seen those apocalyptic numbers around how domestic prices will be. Does that put a new strain on longer-term planning? It’d be great to have solar panels now to take some of the edge off, but if prices recede, maybe next year … who knows? I’m going to step back from any predictions about gas price forecasts, but if those prices come down, what do you think that impact might have on things like sustainability, flexibility, or energy efficiency that we’ve talked about?
Wright
I think consumers were already exploring this. The government does an attitude tracker. You’ve probably seen it. They publish the results every quarter, I think. And the last one in the spring said that 84% of people were most concerned about climate change, so we’re somewhat pushing at an open door in terms of attitudinal aspects of this. And 82% had already thought about ways to make savings, to look at their own bills. Of course, bills are only going one way. And as regards the climate change thing, this was, of course, before we had the recent 40-degree temperatures in the UK. So I think those numbers are only going to go up.
So, there’s acute interest in how people can start to save money in an energy-efficient way that benefits the planet in the context of climate change. Early adopters here are largely EV drivers because that’s a big charge. That’s a big energy consumption, and they are the early adopters of things like time-of-use tariffs from their suppliers.
Basically, they can charge their vehicles overnight when the price is typically lower when demand is lower, and therefore prices tend to be lower. We’re starting to see that pattern of so-called smart charging emerge. But as we go forward, that will become the norm, and we’ll see more and more consumers opting for time-of-use tariffs to move their demand patterns around. Ultimately, I think we’ll see a digital solution that will effectively manage demand in people’s homes and flatten out the curve over the day and over the week.
Reed
So, it feels like energy storage is the place to go. Simon, what are your thoughts?
Cox
Well, I was going to respond to some of Matthew's really interesting points there. One nuance of this is the demographic shift. We spend a lot of time working with our clients, understanding the attitudes and sentiments out there in the country. One of the notable trends in recent research is how the millennials and Gen-Zs, which as of 2020 is, I think, the largest demographic in the world now, are even more engaged with this concept of sustainability than other demographics. I think this plays into the opportunity for companies providing services today, including new entrants to the field.
There’s an opportunity to bring the levels of control and convenience those generations expect in other everyday services into the energy world. And to Matthew’s point, we’ve seen in adopting some of the innovations in this space over recent years that we make it difficult for consumers who don’t adopt. Price is always a barrier, but that simplicity of adoption is absolutely vital for a mass-market breakthrough. I think I share Matthew’s belief that the destination for some of this stuff is automation and intelligent services that take away some of the efforts of adopting these more sustainable and energy-efficient behaviours.
People aren’t going to be waking up at 1:00 in the morning to go and switch on their tumble dryer. There’s going to be a need for these things to evolve, and it’s unlikely that you’ll want to have multiple different interfaces to manage this stuff. So, I see a world in which there is some sort of intelligence behind this that plays into the price signals from the market but ultimately provides the consumer with the standard of life they were after. They don’t want to compromise on whether their clothes are clean to be sustainable. I think there’s a real opportunity to meet some of these emerging expectations.
Reed
Sure. I think one point worth looking at is the role of government, isn’t it? We’ve talked about the 10ten-point plan, and obviously, there was something of a drive for things like heat pumps, and I think we’ve seen some moves in that direction. But I always get the impression that people are always slightly disappointed at the role of government and how the government could be doing more, could be helping things like energy efficiency, could be doing more in heat pumps, that sort of thing. What do you think? Do we need more carrots? Do we need more sticks? Matthew, what are your thoughts?
Wright
I think we need more carrots and potentially more sticks, but I think the way the sticks are done is important. There’s a stick, although maybe many people don’t realise it, in the context of the ban on internal combustion engine cars, diesel and petrol cars. They’re being phased out, but the government gave sufficient notice of that, 2030, for the market to respond. So the adoption of EVs is increasing every week, and we’re pretty much beyond the tipping point there. All of the car manufacturers realised that this was an existential threat to their business – if they didn’t start to convert their vehicles to EVs, then they’re pretty much out of business by the turn of the decade.
So, we’ve seen enormous investment into EVs, and we’re seeing more models launched almost daily. Most importantly, we’re seeing the cost coming down to be comparable with diesel and petrol cars. So that was a stick, but it was a stick with a long notice period. There have also been incredibly successful government interventions on the supply side. The success of offshore wind has been trumpeted over recent years. We saw the auction results a month or two ago down at £37 or £35, something like that, a megawatt-hour for offshore wind. Incredibly low costs, but the hard yards of that have been over the last 10, 15-plus years and driven initially by government subsidies on earlier projects, which were much more expensive.
But as the classic economies of scale and experience curve effects kick in, the costs have tumbled, and now it’s a fantastic success story. So, I think government intervention and policy at the right time, targeted in the right areas, can make a massive difference. What people don’t like is mandatory things that have to be implemented straight away. They have to be done in a way that allows the market to respond, alternatives to be provided at no additional cost to consumers, and I think we’ve seen some real successes there.
Reed
Simon, what are your thoughts? Carrots and sticks.
Cox
The government is facing a very difficult job in this, which is worth recognising, especially in the current environment. Getting that balance of carrot and stick is a big challenge. I think where I see the opportunity for the government to go further is creating the environment for standards to improve across the board. I think the ban on internal combustion engine sales in 2030 is an instructive example of where the supply chain industry can organise itself around that opportunity with sufficient planning and a long enough time horizon. I think it needs to do more of the same across heat electrification and building standards.
I’ve heard that you can build a new house today that is effectively already obsolete from an achieving net zero point of view, and I think this is recognised. Still, there’s a real need to keep raising the bar around that and understanding the replacement cycles on some of these technologies. The capital investment required means that you do need to think long -term. Being subject to the rather faster political cycles and today's energy wholesale price cycles makes that a challenge. But as an industry, we need to keep promoting the importance of that.
I speak as someone who has spent a lot of time working on the smart metering rollout, and I know that comes in for a lot of brickbats and pushback on the success and the cost, but it remains, for me, a vital enabler of a lot of the flexibility services and innovations that Matthew’s been speaking of. So, it’s that long-term, sharp view on what is required that we need the government to bring and have the kind of backbone to drive industry around that.
Reed
Sure. In fact, Matthew, there was a piece of work that you and I worked together on a few months back that highlighted the importance of the technology players in this. I think getting them into the tent around the demand-side opportunity in energy could really unlock a real opportunity for consumers. At the moment, I fear there remains, and there has been for the last 10ten years, a divergence in standards with some of this stuff, which is preventing interoperability of systems and devices. In the medium to long term, that can’t continue. So, I think there’s a real need for someone like the government to start using its convening power to address some of that.
Wright
Yes. I think there’s a real challenge there. I think that area of mandatory standards, if you like, is definitely the preserve of government. Again, we’ve seen only very recently the requirement for all EV charging points to be capable of being smart charged. So, any number have been installed previously that you can’t actually apply that technology to. It’s very important that they can be smart charged going forward for the reasons we discussed earlier so that they can respond flexibly to what’s happening on the supply side.
And again, this interoperability point is massive. We’re having a digital revolution as well as an energy one, and they’re converging, and the digitalisation of our sector is going to increase apace. Having interoperable systems – price signals that can be sent, and appliances or vehicles or whatever it is to respond, that’s a non-trivial task to get that all figured out. The ESO, the electricity system operator, has been doing some work in this area under the banner of something called the Virtual Energy System.
So, in a sense, the virtual system, the digital system, sits alongside the physical assets. And as Simon says, we’ve got technology players, the Googles, etc., interested in this type of thing because they can see a role for the digitalisation of energy, and we do need the technology players involved.
Reed
I’m going to just bring a short pause in there, just for a moment, but we’ll be back soon.
Voice Over
In the midst of an industry undergoing fundamental change, EY teams offer deep sector knowledge, highly integrated solutions and a global EY network to help you reshape your business for the future. This time for disruption is also a time of opportunity for organisations to get ahead of change. Decarbonisation, digitalisation, cost pressures and geopolitical uncertainty are just some of the forces transforming the energy and resources industry. EY energy and resources teams can help you focus on the structure, services, technologies and capabilities needed to create long-term value and bring you toward the future of energy. Together we can unlock the opportunities of an uncertain future and build a better working world.
Reed
Brilliant. I think we left on a really interesting question around infrastructure and demand and the interplay between them. So, Matthew, I’m going to come back to you. Do you think that demand is driving those infrastructure plans, or do infrastructure plans drive demand? What is going to be key in there?
Wright
That is a really good question and a huge question. Traditionally, certainly, if we’re thinking about the resource side, the generation side, we’ve built the infrastructure to connect the generation, and we haven’t thought so much about citing some of that. But at the same time, some of that generation is increasingly not so portable.
What do I mean by that? So, offshore wind is really successful. It would be great if it were closer to the demand, largely the south and east of the country, but the further north and out into the sea you go, it gets windier, so the best resources are in the North Sea, up into Scotland, etc. So, we’re having to build quite a lot of infrastructure to connect that resource. We can do it smarter, though. Recently, the electricity system operator published something called the Holistic Network Design, which looks at connecting the offshore wind farms but also thinks quite hard about how we move the power to where it is consumed.
So again, traditionally, we’ve done those two things separately. We’ve just connected the wind farm to shore, and then we have what’s called transmission constraints. So, we have bottlenecks on the transmission system moving that power around and getting it to where it can be consumed. Now we’ve integrated that through Holistic Network Design, which really starts to think about how we do those two things together.
The other thing that we have published recently is some work on what we call locational marginal pricing, where we do believe there is some opportunity to provide price signals to get generation and demand located in places where the costs to the total system are less. Now, this has not yet been implemented. Indeed, the government has launched a review of electricity market arrangements that’s considering all kinds of potential reforms to energy markets to make it fit for purpose for the net- zero future. Still, I think we definitely need to get smarter at connecting both the supply and demand side and the infrastructure that sits in the middle to minimise the cost to consumers.
Reed
Sure. Simon, what are your thoughts? You’ve mentioned that the way there is an interplay between smarter ways of taking energy from the grid, and there are chances to improve there, but what are your thoughts about what needs to change to drive that? Do you think the infrastructure is ready?
Cox
Well, Ed, if I can answer a slightly different question – because I think there is a very complex, technically challenging, but very important debate about the future market mechanisms that, frankly, I’m probably not qualified to talk on. But what I think it harks back to a little bit is the question before the break around government intervention. And I think two things that are uppermost in many people’s minds across the industry are the importance of what we often call a just transition and maintaining social equity. As the whole energy system has to transform, I think we’re all very conscious of the need that we don’t leave people behind as we make those changes, and I think a lot of that plays into the thinking around the future market mechanisms.
I think there’s probably a recognition that in the early days of the supply market, there was a kind of subsidy to iInternet-savvy consumers. That’s what we don’t want. If you knew your way around a price comparison website, you got access to the cheap deals, and essentially, you had digitally less savvy consumers who sometimes could not switch their supply, essentially subsidising consumers who were more fleet of foot. I think that’s an issue we don’t want to repeat as we transform things in the coming years.
I think that the conversations we’ve been having about infrastructure and the way to pay for those connections, etc., do play into that, not just in prices people pay from an energy supply point of view but from the utility they get as they live their lives. I don't know, some of the challenges they’re having with the approval of the Sizewell C nuclear power plant and some of the infrastructure that’s going to create in East Anglia. So, yes, I think these are challenging conversations. Government has a hugely important role. Consultation is key, but this overriding ambition to make sure that the transition is a just one, I think, is really important.
Reed
Sure. A lot of the things we’ve discussed, flexibility, sustainability, energy storage, demand … I know there’s a certain group of our listeners who will be crying out, “‘hydrogen solves all these problems”’. There are some real hydrogen fans out there. I wonder what your thoughts are about hydrogen and its role in the energy mix. Obviously, we’ve just talked about electricity here, which is good at meeting immediate demand, but what part do you think hydrogen could or maybe should play? Matthew?
Wright
So, I count myself amongst the hydrogen fans. Why is that? When we look at the system today, we have one of the most reliable energy systems in the world, and we need to maintain that, but when we look at the mix that’s required even as early as 2035, the government target is to have a fully decarbonised electricity system by that year. When the wind is blowing and the sun is shining, we will have lots of power in this country, probably more than we know what to do with. But what we should probably do with it is store it in some form, and that’s one of the uses for hydrogen.
One of the things that we need to have in a fully decarbonised electricity system in 2035 and then on to net zero in 2050 is some form of long-duration storage. We’ll have a huge amount of storage through EVs in homes, which is why smart charging and, ultimately, vehicle-to-grid will be important. But we’re going to need something else because sometimes the wind doesn’t blow for days, and we will need to call on a store that isn’t fossil fuel, isn’t natural gas. That could well be hydrogen, but there are some hurdles.
At the moment, the process of creating hydrogen from electricity, called electrolysis, is perfectly capable. It’s been around for centuries but is not as cost-efficient as it needs to be. I think we’ve seen what can happen, and I talked earlier about offshore wind, where you start to get serious about something, and you really invest at scale, and you start to see economies of scale and experience curve drive down costs. I believe we should be building, at scale, hydrogen electrolysers and starting to see how they respond to those costs and see if we can drive down the cost and get a cost-effective form of energy storage that isn’t fossil fuel-based.
And that’s the promise of hydrogen, and if we can do that, we can have a system that runs entirely on green energy because we can store hydrogen and move it around the country, potentially using some of the existing gas infrastructure. And we can use it to recreate electricity, although that round-trip efficiency isn’t great, we can do that. And, of course, we can look at hydrogen boilers in homes as an alternative to electric heat pumps. And there’ll be places in the country where we create these hydrogen hubs where I think that will, again, make sense.
The barrier is economics – the cost- but we’ve seen enough things, probably since the dawn of time, that the cost comes down when you do something over and over. And the government policy is to invest in hydrogen and hydrogen economy, and we’re starting to see that. My view is that we need to redouble efforts in that area and start to drive down the cost and see if it is the panacea, the ultimate solution to the gap that currently exists in this net- zero world.
Reed
Simon, what are your thoughts? I think there is a promised land that Matthew is talking about, hydrogen and electricity coexisting and supporting each other.
Cox
I’m not sure I could put it any better than Matthew did, to be honest. I think from the consumer point of view, the opportunity with hydrogen is that it does offer less of an adjustment in some ways to the end-user experience, especially in the home for heating. Once you’ve got to a hydrogen boiler, it’s quite similar to the kind of situation you’d have if you had gas-fired central heating without some of the prerequisites and conditions you need for heat pumps to be successful. So, an absolutely vital role to play, and I think anything that almost offers the promise of somehow less disruption to people’s way of life is quite nice.
I think the hydrogen boiler – at the moment, it’s early days. They’re quite expensive, the ones that can run dual fuel, but we know that all of the manufacturers have that in their pipelines to bring models to market in that space. So, no, I definitely see a huge role for hydrogen. I’d be interested in Matthew’s view on the blue-versus-green debate that I sometimes see floating around. Matthew, do you see blue hydrogen as an option in the slightly nearer term?
Wright
I think, very probably, and blue hydrogen is created effectively from fossil fuel, so steam methane reforming, etc. So, it is a form of hydrogen production that exists today. It’s reasonably efficient and can probably play a part in the short to medium term. My personal view (and reasonable people can disagree about this) is that we should be investing in green hydrogen, effectively producing hydrogen directly from electrolysis using abundant energy at certain times. We will have 50 gigawatts. That’s the government target, 50 gigawatts of offshore wind by 2030.
Cox
And that’s a quadrupling from today, Matthew, is it?
Wright
More than that, actually. Yes. There’s about 11 gigawatts, 12 gigawatts installed today. We’ll have a lot of onshore solar, onshore wind. We’ll have a lot of energy when the sun shines and the wind blows. So we need to find a way to store that energy and use that energy, and it seems natural to think about electrolysis and creating hydrogen as something that fits within that picture. So, yes, I think the longer term is green hydrogen. The transition may involve some blue hydrogen.
Reed
And I suppose a lot of the debate comes down to price, doesn’t it, and people have historically said that blue is cheaper, but with gas prices where they are today …
Wright
Indeed.
Reed
That discount is going to be significantly reduced. I suppose just coming back to something that you mentioned earlier, Simon, we were talking about the shifting consumption. I think some people look at the future, look at a world where we’re powered by renewables, possibly with hydrogen complementing it, but really moved away from fossil fuels. People are worried that the quality of life will be worse. I think there are concerns around whether we will be able to run washing machines. Will we have cars? To what extent do you think our current energy consumption is going to change, I suppose, qualitatively?
Cox
I think, Ed, I’m in danger of repeating myself here, but I don’t think we will get mass adoption if we expect people to compromise on quality of life. So, I’ll tell you a story. I got a cab back from the station last night, just ten 10 miles. It was in an EV, and it was quieter, more comfortable. It was a better experience, frankly, and that is why people are adopting EVs quickly. With incentives, they are a better proposition for the consumer in a lot of use cases.
I think the challenge we need to set ourselves as we transition to a more sustainable world and an energy system that is on the pathway to net zero is to provide consumers with uplifts in quality of life and more convenience. More convenience, more control. Where that’s going to take government intervention to make it happen, through tax breaks or financial incentives of some nature to spur the uptake of these things and to spur investment by industry in it, I think that’s going to be necessary.
I’m sure it was Tony Blair who originally came to this view that any adjustments to people’s lives that saw their quality of life diminished to promote sustainability were non-starters. I’m of the view that human nature is quite a powerful force in that regard. I also don’t think it’s that great a challenge. I think that every graduate that we hire into our business today wants to work on sustainability. The world is moving to a world where people want to address these problems, and the power of human ingenuity applied to these things will mean we won’t have to make compromises, I think.
Wright
I agree. I think Simon makes a great point. The alternatives have to be at least as good as the things that people are giving up. Why should people compromise? And I don’t think they will adopt if it’s a poorer relation. The car example is a great one. But equally, regarding flexibility, this is not about people watching their smart meter and saying, quick, rush, put the dishwasher on because the price has just dropped and the wind has come up or whatever it is, the sun has come out. That’s not going to happen. It has to be seamless.
But I think the way this will happen is, people will say, well, as long as my car is charged when I want to use it and as long as my house is warm in the winter and, I think, increasingly cool in the summer (that might be another demand, air conditioning, but we’ll see). And as long as my frozen peas are still frozen, I don’t really care if there’s some sort of guiding mind, some mother of all algorithms controlling that somewhere, but if it keeps my standard of living the same or better, if it keeps the utility of my appliances and cars, etc., the same or better, and, most importantly, if it keeps cost down for me because I’m not charging my car at peak and I’m making energy efficiency savings by cycling things on and off, that sounds like a good deal.
So, I think that’s the challenge for the market. I think that’s the challenge for all of us, to make the net- zero alternatives better than what people have had to date. Challenge thrown down; gauntlet thrown down, I think, to everybody from appliance manufacturers, vehicle manufacturers and energy and electricity suppliers. That’s the important point.
Reed
Simon, the government has taken steps to manage the price rises through a new cap on bills. Is it enough? Does it also do enough to encourage us to use less energy?
Cox
Well, Ed, the government have a very difficult balance to strike. As you said earlier, there was a real imperative for them to intervene politically. The full cost of 50% of households falling into fuel poverty and so on was unconscionable, I’m sure, especially as Liz Truss came into power. What I think now more broadly is that they (having bought some time with this intervention at an obviously significant cost to the country) need to quickly think through, what are the more fundamental adjustments to the wholesale market and other parts of the energy market that need to be done to put us into a more sustainable position going forwards? And I know, speaking to my clients, those conversations with government are very much ongoing and quite urgent.
But coming to your question about the incentivisation of consumers and how we consume energy, as we all know, price signals are the most important in driving when and how people consume. Clearly, you probably feel the same as I do. The pressure almost comes off a little bit as we look into winter. So I think what’s true at this point is probably a few things. One is, the government and industry need to continue to make interventions and motivations to people to consume less, to consider how they’re consuming energy in the near term as we think about energy supply security, etc. Security of supply, I should say.
But I think it really provides an opportunity for industry. They’ve been given a bit of a pass, effectively, with the government price guarantee. So now I think it’s time; it’s incumbent on them to double down in thinking through the kind of services, the advice, the products and services they can provide to consumers to help them reduce energy consumption going forward. Whether that’s thinking through, what’s the next story around eco and the energy efficiency and insulation spaces, when it comes to more interesting opportunities around solar panels and storage, those business cases will inevitably look more appealing in the future. We hear already about the crunch on solar panel providers and how hard it is to get those installed at the moment. I think that’s really where I see the opportunity here, Ed.
Reed
Fantastic. I think that’s a great point on which to end, and I think there are some really interesting points raised there about the ways in which we can use data, around energy efficiency, and, obviously, a nice, positive note to end on. That question about public acceptability – things have got to keep on getting better. Otherwise, we’re all going to struggle, aren’t we? Thank you so much, Simon and Matthew. I’m really impressed by the amazing insights you’ve shared on this consumption question.
And to the audience, please let us know what you think about some of the ideas we’ve raised here. You can email outloud@energyvoice.com. And if you’d like to be part of the conversation and share your story with the energy industry, you can also email outloud@energyvoice.com. You may already know that every week the Energy Voice team get together to highlight important stories from the world of energy in our regular podcast series. So, if you’re not already, please do follow Energy Voice Out Loud in Apple Podcasts, Spotify, or wherever you get your podcasts to get this free essential briefing every Friday. This is the first of the five-part Net Zero Nudge. Next up, we’ll be talking about decarbonised energy, so please keep an ear out for that. For today, I’ve been Ed Reed. Thank you for listening.
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External presenters:
Matthew Wright – Head of Strategy at National Grid ESO
Ed Reed - Editor at Energy Voice