The Department for Business, Energy and Industrial Strategy on Monday launched a 12-week consultation on the “biggest electricity market shake-up in decades” in response to over-billing and Britain’s move towards renewables. One proposal suggests introducing incentives for consumers to draw energy from the grid at cheaper prices when demand is low or if the weather is particularly sunny and windy, saving households money. Officials said such a move could send “sharp” messages to encourage consumers to be more flexible in their use and seek cheaper, greener energy at certain times. The initiative will minimize grid costs by bringing electricity demand closer to supply. If introduced, the policy will build on a plan being developed by National Grid to tackle prices this winter. It plans to reduce the risk of blackouts by paying consumers to use less electricity at peak times. The consultation on the Review of Electricity Market Regulation (REMA) also proposed a “decoupling” of gas prices from electricity prices to ensure that the benefits of cheaper wind and solar power are passed on to consumers. At the moment, the wholesale price of natural gas effectively determines how electricity is priced regardless of whether the energy is produced through renewable energy sources. This mechanism has increased costs for green energy suppliers since the start of the energy crisis, in which nearly 30 suppliers have collapsed. More than a quarter of the UK’s electricity supply comes from renewable sources. But rising gas prices, exacerbated by the war in Ukraine, have pushed up prices across the board and deepened the cost-of-living crisis. Business secretary Kwasi Kwarteng said: “We have just seen the price of UK offshore wind fall to a record low and natural gas is a shrinking part of the electricity generation mix, so we need to explore ways to ensure the electricity market adjusts to the season. “This includes ensuring that the cost benefits of our growing supply of cheaper energy pass on to consumers, but also that our system is fit for the future – especially with electricity demand set to double by 2035.” The government also plans to consult with industry on whether to implement a form of local pricing in the UK. Such a system could result in large cities such as London being zoned with different pricing structures, or residents in different areas paying different rates from each other. The price structure could depend on the availability of nearby local renewable energy sources. The concept is in its early stages. Any such system may have to allay concerns that consumers in some parts of the country could receive much higher energy bills than those elsewhere. Subscribe to the Business Today daily email or follow Guardian Business on Twitter @BusinessDesk Any reforms are unlikely to take place until at least the end of next year. Ministers are still reviewing the state of the energy market ahead of this winter, amid fears that gas shortages in Europe could cause high prices or squeeze supply in the UK. Separately on Monday, National Grid published its annual Future Energy Scenarios report, which sets out how the UK can achieve its net-zero carbon target by 2050. The company said it wants to operate a fully deregulated system of electricity by 2035. It proposed measures including a regional approach to decarbonising residential heating systems. increasing the availability of flexible ‘time-of-use’ tariffs; and improving large-scale geological hydrogen and electricity storage projects.
