This project aims to identify a wide range of potential options for structuring and organising domestic retail energy supply -–from evolution of the status quo to more radical changes – and asking how well these different options would deliver decarbonisation while providing fair access to affordable energy for households. Starting this conversation about potential options could help policy makers think more radically about what is possible in this space.

Successfully delivering net zero will require fairly significant changes to the way households use energy. If decarbonisation policies are successful, people will adopt electric vehicles, heat pumps and other green technologies in much higher numbers, pushing up demand for electricity while reducing demand for gas. Meanwhile, as the power sector decarbonises, and more renewable electricity is brought into the system, there will be need for more ‘flexibility’ in energy use to keep down peak demand and manage the network through variable volumes of renewable generation. Households could play a key role in this, although there’s still a lot to learn about how far individual consumers will want, or be able, to use energy flexibly.

It’s not clear that the current retail model is well structured or incentivised to deliver this transition. At a basic level, retailers’ profits are tied to higher energy consumption, limiting incentives to help customers reduce their usage. The relative lack of innovation in customer propositions in the retail energy market to date is a particular challenge. Some retailers are already repositioning themselves to engage consumers in household decarbonisation, but the current regulatory model makes this harder. For example, consumers have the right to switch energy suppliers at any time, which means that services that support decarbonisation but require a longer-term commitment to enable cost recovery are currently infeasible.

Many people across the sector believe that the market could operate differently, but there is little consensus on the range of reform options. There is also a widespread recognition that households continue to face pressures on their budgets, which are likely to impact the extent to which some options can be delivered in the near term. The aim of this work is to start a wider conversation about the long-term future of the energy retail market and how it can adapt to, and support, a future net-zero energy system.

We will be bringing people from across the energy sector together to think creatively about whether the current market structure best supports this energy transformation and to identify potential alternative approaches. We want to take a step back from the current system and think about a future energy system in the next 10-15 years by asking the following questions.

• What does a future energy system look like?
• Does the purpose or rationale for a retail sector change when thinking about a future energy system?
• What are the different options for reform, and how could they be achieved?

We are interested in hearing different viewpoints, and we want to identify areas where there is consensus and disagreement. We will be publishing a report with our initial findings in September 2023.