N.New energy tariffs designed for a low-carbon future could make people worse off with bad deals, research has shown.
The study conducted by Leeds found that new types of contracts can benefit all types of customers, with the option of selling excess energy from solar panels or incentivizing the use of energy during off-peak hours.
However, it was unlikely that many people would choose them because they were excluded from the energy market, did not trust energy companies, or were already satisfied with their current tariffs.
Those who are likely to adopt them first are younger, have higher incomes, and are more educated.
?? Smarter and more flexible tariffs worsen the gap between those who profit from the market and those who lose. ??
Dr. Stephen Hall, Earth and Environment School
Energy companies are already offering these contracts, but there is little understanding of how much consumer demand is for these new models and how they may affect consumers.
The study, conducted by a team that included researchers from UCL and the University of Waikato, New Zealand, shows that consumers who already trust the energy market, with higher incomes and a positive outlook on technology, have contracts that help the energy probably do well system decarbonization.
However, consumers in lower income and educational groups may be too cautious to take advantage of early adoption, too disinterested in switching providers, or find the market too unreliable to indulge in. This could lead them to resort to more expensive, less bespoke, or even riskier contracts.
The lead investigator Dr. Stephen Hall of the School of Earth and Environment said: ?? These new energy contracts are really important to low carbon energy systems and they are already showing up on price comparison sites.
?? Our work shows that only some consumers find these new types of energy attractive and others cannot access them because they rent their home or may not be able to afford the latest technologies such as electric cars and household batteries. This means that some consumers may be left behind because they cannot or do not want to get involved in new tariffs.
?? The energy market tends to favor wealthy and active consumers, while often exploiting inactive consumers who typically live in lower income groups.
?? The results of this research suggest that without intervention, the gap is likely to widen as smarter and more flexible tariffs widen the gap between those who profit from the market and those who lose. ??
The researchers wanted to investigate the likelihood of customers choosing new types of energy contract when presented with a range of offers.
Approximately 2,024 customers were exposed to five new business models and asked a series of questions about them, including their likelihood of signing up with them if they become available today.
The models included options such as longer 10-year contracts with energy efficiency measures that allow utilities to control some household energy services, make the switchover decision automatically, and trade their own excess green electricity.
From the responses, the researchers identified four consumer segments based on their commitment to their current electricity and gas suppliers, their appetites for choosing new business models, and their reasons for wanting certain types of products. The segment with the greatest appetite for new models was also the smallest, suggesting that they may have a limited consumer base to expand into.
This group consisted of people with the highest incomes, tended to be younger and interested in the adoption of new technologies, and also had the highest level of education.
The other three segments were less reluctant to adopt new business models because they were cautious about introducing new technology, did not believe that the new tariffs would offer a better deal, had significant trust issues in the market, or were too far away from changing suppliers regularly .
The results are discussed in the article “Adapting Consumer Segments to Innovative Business Models for Utilities” published in Nature Energy. They indicate that there is potential for further innovation in the energy market, but at the same time the customer base may be more limited than generally expected.
There is also a risk of further loss of confidence in the energy market as tariffs become more complex and winners and losers become more obvious.
Jillian Anable, professor of Transport and Energy at Leeds’ Institute for Transport Studies, conducted the statistical analysis. She said: ?? Our analysis has revealed a variety of segments that show that there is no such thing as an average domestic energy consumer.
?? Energy companies will have to work hard to customize their products and marketing to reduce the retreat, complexity, and distrust of people about their home energy use. ??
Dr. Hall added: ?? Our research shows that there is some demand for innovative energy contracts, but there is a divide between the groups they find attractive and their ability to join them. Energy companies should address them directly and give them the opportunity to respond to their preferences.
?? As the market diversifies and contracts become more complex, consumers can choose to stick with what they know, which brings with it more complex consumer risks. The challenge for regulators is to recognize these risks and to further develop the regulatory model of the retail market.
Further information
Image: Piqsels
For media inquiries, contact Lauren Ballinger, University of Leeds Press Officer, at l.ballinger@leeds.ac.uk
