We need to hold our nerve on green levies as the energy crisis starts to bite
Disruption in the energy markets is set to drive up bills for every family and business in Britain. With gas prices in the UK recently reaching an all-time high, the consumer impact will be profound. Millions of households are expected to see annual energy bills of £3,000, and many face fuel poverty in an escalating cost of living crisis.
While the world watches in horror at the human suffering unfolding from war in Ukraine, policymakers and business leaders are taking action. There has been a significant escalation of economic sanctions targeting Russia, with the US President Joe Biden’s decision to ban all Russian fossil fuel imports and Boris Johnson’s announcement of a ban on future oil imports. These will come with significant consequences for inflation.
In the face of geopolitical and economic insecurity, the necessity of making transformative change to the way we generate and use energy has become even more urgent. Firstly, politicians should not bend to demands to halt the “green levies” on energy bills. It would reduce costs for consumers but would also stop the money that funds government support for renewable energy and energy-efficiency programmes which will keep prices low in the future.
Secondly, the leaders of energy companies should press forward to make their businesses more environmentally friendly and confront the climate challenge.
In our report “Next Stop: Net Zero”, energy company executives from across the globe are agreed: 74 per cent feel the weight of demand for action from consumers worried about the environment, 80 per cent noted pressure from government regulators to become environmentally sustainable, and 82 per cent of energy supplier executives believe the net zero-emissions agenda presents an opportunity to transform their business.
As well as understanding the price pressures on consumers, executives face cost and cultural barriers to innovation within their own organisations. In the UK, especially, there were significant concerns from executives that their company culture does not support innovation.
Despite these hurdles, industry leaders recognise that the crisis in gas prices underlines the importance of shifting towards renewable energy. Michael Lewis, the chief executive officer at E.ON UK, said the crisis is a reminder of the need for “long term solutions” to “move to a renewable-enabled energy efficient future”.
There is an understanding in the industry that “business as usual” is no longer acceptable and many have placed digital transformation at the heart of their plans. Almost nine on ten executives pointed to digital tools to help reach net zero.
This work is directly relevant to the challenge of cutting soaring bills. The implementation of technology and transformation programmes provide energy companies and their customers with the means to understand and reduce their energy usage, thereby cutting bills and carbon emissions.
One Australian energy company is using digital technology to loop homes with solar panels and domestic batteries into a huge grid that helps manage demand across the energy network. In exchange, consumers get discounts on their bills.
Real-time technology can show minute by minute the carbon outputs of a company, a business unit or even an individual household. This can help firms understand the impacts of their decisions and encourage different behaviours.
Energy retailers, meanwhile, can achieve something similar for individual customers, helping them see the impact of the energy crisis on their bills. Upgraded mobile apps can include energy management tools and personalised advice, providing insights to customers on their household energy consumption. But while these are available, less than half of UK energy customers use their energy supplier’s app. As energy bills mount, that matters even more. A combination of real time notifications, behavioural nudges, smart meters and dynamic tariffs can cut usage by up to 10 per cent, according to our research.
Start-ups are pioneering new approaches to everything from providing new digital platforms for energy markets to deploying AI to battle climate change. Significant changes to the way we use and save energy in the coming years will come from partnerships between these new companies and the market’s biggest players.
By more effectively leveraging the technologies at hand, energy companies will be better able to straddle the current gap between rapidly rising energy costs and the environmental expectations of customers and governments.