As the UK transitions to a lower carbon energy system, the Centre for Sustainable Energy (CSE) identifies a critical gap in Labour’s energy plans. While the Warm Homes initiative and removal of restrictions on renewables are great steps forward, Labour also need to focus on the system in between; the energy networks, markets and regulations needed to deliver a fairer and greener energy system.

CSE, with our extensive experience in advocating for both technological innovation and social justice, proposes key policy recommendations to ensure a just and effective energy transition. This blog outlines how policymakers can create an energy system that is not only flexible by default but also fair by default.

New government, new plans for our future energy system

Labour has big plans for energy; greenlighting onshore wind development and upgrading 5 million homes, but one key piece of the puzzle is missing from their Manifesto; creating an energy system that can balance supply from renewables with demand from our homes. In a renewable energy system reliant on intermittent sources like wind and solar, we can’t just increase our supply of energy, we need effective management of demand. 

We’ve already seen big changes in the energy system to encourage consumers to use energy flexibly when renewable generation is plentiful, avoiding the need to power up gas turbines.

A range of smart tariffs are now available offering customers lower energy prices if they move their demand around. During the last two winters, 1.6 million households agreed to turn down their energy use through the demand flexibility service to manage the grid.

This change is vital for transitioning to a low-carbon energy system. But the change is currently being driven by the market and CSE has long been calling out the potential such changes have to create new forms of inequality. See our Smart and Fair report. Most recently we submitted two consultation responses summarising what we think needs to happen to ensure risk free widescale adoption of time of use tariffs and regulations of flexibility services.

We need an energy system that is flexible by default, but also fair by default. Labour needs to ensure this happens as they roll out their Warm Homes plan and remove restrictions on renewables

Charlotte Johnson, Head of Research Programmes at CSE.

The missing link in government plans

While Labour’s £6.6 billion Warm Homes plan is a significant step towards reducing energy bills and decarbonising our homes, it overlooks a critical component of a truly smarter, greener and fairer energy system. The plan focuses primarily on physical upgrades to buildings, such as insulation, batteries, solar panels, and low-carbon heating. However, it fails to address the vital need for demand management and consumer engagement.

What Labour’s plan is missing:

1. Integration of demand management: The plan doesn’t explicitly include provisions for smart meters, or control systems for low carbon technologies that can respond to grid signals. These technologies are crucial for creating a flexible energy system that can balance supply and demand efficiently, and for reducing household bills. So, the Warm Homes Plan also needs to integrate and plan for the flexible and responsive energy system we need.
2. Consumer education and engagement: There’s a noticeable absence of initiatives to develop people’s understanding of the evolving energy system. Without proper education and engagement, households may struggle to fully benefit from new low carbon technologies or participate effectively in demand-side response programs.
3. Fabric + flexibility-first approach: The plan doesn’t flag the need for home upgrades to contribute to a flexible energy system or be carried in relation to network planning. This oversight could lead to missed opportunities for reducing network costs and managing the grid effectively.
4. Consideration of vulnerable consumers: While the plan aims to reduce bills overall, it doesn’t specifically address how the changes might impact vulnerable customers differently. There’s a risk that without proper safeguards, the transition to a smarter and more flexible energy system could create new forms of inequality.

CSE’s vision for a just and smart energy transition

We want to see the new government take action now to ensure the market delivers decarbonisation fast (in line with Labour’s ambitious 2030 target) and fairly. Here’s what CSE proposes:

1. Policy alignment: A Warm Homes Plan that doesn’t focus on how these home upgrades contribute to a flexible energy systems is missing a trick and risks counterproductive outcomes.  Upgrades need to support demand management and result in technologies installed in people’s homes that are simple to automate and responsive to system needs. For example, turning up when there’s plentiful cheap energy and turning down when there isn’t. This approach would avoid network upgrade costs and prevent disproportionate impacts on lower-income households.
2. A new approach to default tariffs: We know that many people struggle to engage with the retail market and find it hard to get themselves onto the best tariff. This issue fell off the agenda with the energy price guarantee, but with market wide half hourly settlement on the horizon and the widespread introduction of time of use tariffs we need a set of default tariffs that work for people with different demand profiles and routines. Our energy system will have to be flexible by default, and we need tariffs that work with people, rather than put them at financial risk.
3. Well-funded smart energy advice:  We’ve been calling for the government to provide smart energy advice to help consumers understand smart tariffs, how they operate, and what’s right for their circumstances. We also requested clear terminology and pricing information from suppliers, guidelines for assessing if households can benefit from smart tariffs before selling to them, and user-friendly tools to match people with suitable offers.

At CSE, we’ve been advocating for a smart and fair energy transition for over 45 years. Our commitment to both demand management and social equity places us in a unique position to advise the government and energy industry on creating an energy system that is both flexible and fair by default. Our recommendations provide a roadmap for policymakers to ensure that the transition to a low carbon energy system leaves no one behind while meeting our ambitious climate goals.

We’re ready to work with policymakers to implement these recommendations and create a just, smart, and sustainable energy transition.