The Energy Revolution Is Here: How Smarter Policies and Faster Action Can Lower Bills and Unlock the Potential of Renewables

By Lizzy Roberts, Director of Energy and Clean Tech

The Government is only going to succeed in its pledge to lower bills as we decarbonise if it unlocks making it cheaper and easier to use and store green energy.

We’re in a funny place in the transition. 42.3% of the UK energy mix was from renewables in the 12 months to January 2025. However, if the wind and the sun are free, why are we not yet feeling the benefit of lower bills? Of course, it costs money to fund the upfront capital costs of wind and solar farms but, fundamentally, renewables are cheaper to run. We should be feeling their effects in the form of lower energy bills.   

We don’t yet have an energy system that is geared up to make the most of our renewables and storage. The cost of this inefficiency is money that could be used today, to lower bills, instead going to waste. Money currently being directed into switching off renewables, and turning up gas, needs to be re-directed into incentives for batteries and shifts in demand at both a grid, but also importantly at household level. We see some of this happening today in the form of small-scale pilots and tentative discussions about scaling markets, but this is not fast enough and with so much renewable and storage capacity coming online, we’re facing growing bills and growing inefficiency.

To highlight the scale of the problem, in 2024, constraint payments, which are made to energy generators to balance supply and demand, were some of the highest ever. According to NESO, which is responsible for balancing the system, without a significant change in approach these are on track to reach multiple billions by 2030. 

If we properly support the deployment of these technologies, these payments could instead be going to customers in the form of lower energy costs to use up excess supply or rewards for shifting demand to less busy periods.

When we went through a cold patch earlier this month, Octopus Energy highlighted that NESO offered 6 times less financial reward to households to change the times of day when they were using their energy than it paid to gas power plants for back up. Analysis from Modo Energy has shown (and discussed here in this podcast) that currently we issue instructions for wind generation to turn down because the energy can’t get through the transmission network in Scotland, while issuing demands for gas generation in the South. Rather than scaling the markets that would see households benefit at the pace we need, we’re seeing continued reliance on centralised fossil fuel generation.

This is a challenge the Government needs to tackle, and quickly. The UK is rightfully pushing ahead with greater deployment of renewables but to deliver lower bills, policy makers need to address the disconnect between more renewable capacity and energy costs.

Creating the right market rewards for consumers is key to achieving lower energy bills

The UK has the potential to deliver world-leading flexibility. OVO, Octopus and Zenobe are three of the UK’s business unicorns who all see a more intelligent, flexible energy system as central to the future. We have some of the best wind resources in the world and one of the most rapid growth rates of energy storage. Britain has broken records with the largest flexibility market tender in the world, and the service is becoming a more recognisable opportunity for consumers – but moving this from pilots and small tenders into routine practice is crucial.

Government needs to resource the flexibility policy to reflect the scale of the change needed.

It’s not surprising that redesigning an energy system to achieve this takes effort. We have to move away from a centralised, supply-driven market, to one that values demand as highly.

This Government and ones before it have understood how crucial it is to get this right. As far back as 2017, the then Secretary of State Greg Clark published the Smart Systems and Flexibility Plan that was designed to unlock this market. We’ve since had two similar strategies, but the pace of change is not quick enough, and adjustments need to be made across the sectors that are electrifying. The latest forecast of how we reach the Government’s ambition of becoming a clean energy superpower by 2030 sees flexible demand response scale to 10-12GW. Not only do we need a market that is rewarding day-to-day clean energy storage and demand shifting as standard, but we need to make sure that smart charging, be it of vehicles or home batteries, is being incentivised. Lots of this requires technical changes to markets, but it also needs real leadership and a shift in mindset from organisations like Ofgem and NESO to view flexibility as something that needs to be prioritised ahead of old practices.

Progress must be accelerated by the Government and its new Mission Control, as well as all the bodies responsible for flexibility and demand side response. Government ministers need to understand more about flexibility markets and the challenges they address, so that they can grasp how to accelerate the deployment of smart appliances which can help mitigate the need to spend billions on new network infrastructure. If you have millions of EVs plugged into the grid, and a significant portion of those drivers aren’t benefitting financially from smart charging to support the grid, a government minister needs to be asking why. The Government’s new Low Carbon Flexibility Roadmap, expected this year, must answer these questions.

How businesses can help place the consumer at the centre of the transition

At Seahorse, we have routinely worked for new technologies that have the huge potential to give back to consumers, either in the form of flexible lower bills or lower system costs, but who currently lack the concrete reward from the market for the demand turn up or turn down they offer.

Readjusting the way the energy market has worked is a nerve-wracking task, businesses can help the Government feel confident in accelerating demand side response by communicating the practical ways consumers will benefit from their technology and highlight the inefficiency of how things currently work.

Placing consumers at the centre of this dynamic is the link that explains how more renewables means cheaper bills. With the right policies and leadership, the Government has a unique opportunity to drive the UK's energy system toward a brighter, more inclusive future.