Report Finds Flexible Energy Use Could Save 14 Billion A Year By 2040

According to new research conducted jointly by Cornwall Insight and Smart Energy GB, households that take up a more flexible approach to their energy use could help reduce national wholesale and system electricity costs by an estimated £14.1 billion a year by 2040. The study predicted that wide-scale adoption of flexible energy solutions could bring an annual energy cost reduction of £4.6 billion as early as 2030. It is estimated that households that take part in these flexible electricity initiatives also stand to cut wholesale electricity costs by more than 14% in 2030 and a massive 52% in 2040 which is a predicted annual saving of £115 and £375 respectively for an average household. 

The investigation’s data revealed that flexible electricity initiatives such as time-of-use tariffs, smart meters and the integration of solar PV and battery storage systems had the potential to save UK households billions in the next few decades. 

The demand for electricity is likely to increase hugely in the coming years due to digitisation and electrification which could drive up peak power and as a result of that energy bills. Householders could help to deliver major efficiencies which would help to cut costs if they took a more flexible approach to the use of electricity in the home. 

Anna Moss, Senior Consultant at Cornwall Insight, said:

“Our analysis has unveiled the immense potential of flexible household electricity use to support GB as it journeys towards a renewables-based system. By empowering consumers to become the architects of their own energy usage as well as supporting home decarbonisation technologies across the consumer base, the government can reduce expenses, alleviate strain on the grid, and even eliminate the need for additional costly gas-fired power stations. 
This is a defining moment in our energy journey. Britain is moving along the path to a more electrified future, where household engagement with flexibility will enable us to reach net zero at lower cost, allowing consumers to realise the financial benefits associated. Smart meters play a pivotal role in this transition, providing crucial data and insights that empower consumers to optimise their energy use. 
By embracing household flexibility, we not only revolutionise our electricity landscape but also rejuvenate our commitment to a greener, more sustainable future.”

National Grid ESO has already trialled new schemes to encourage more flexible energy usage such as the Demand Flexibility Service. The Demand Flexibility Service was tested during the 2022/23 winter period and saw households cut their electricity usage during times of lower generation to help lower the demand on the system. The scheme was deemed a success as it delivered 3,300MWh in electricity reductions at peak times across the 22 events. 

It's easy to see why with schemes such as the Demand Flexibility Service and time-of-use tariffs, costs could come down in the future. One example of a time-of-use tariff is Octopus Energy’s Agile tariff which changes the price of electricity every half hour to reflect the wholesale rates. 

More often than not, daily peaks in electricity demand in the UK happen on weekdays between 4 and 7pm. In order to meet this peak demand additional fossil fuel-generated electricity is often required. Because fossil fuels are more expensive than renewable options such as wind and solar this drives up wholesale electricity costs and ultimately is passed onto the consumer with more expensive bills.

With the anticipated increase in electricity demand over the next few years the problem is set to become more severe. One of the findings of the new research paper is that if householders don’t adopt flexible electricity solutions the UK would have to face the significant burden of constructing four new gas-fired power stations by 2030 with a huge £2.5 billion price tag, coupled with substantial carbon dioxide emissions. The research paper emphasises the importance of a smarter and more adaptable energy system.

If consumers can be persuaded to modify their electricity usage according to the availability or price of electricity, by, for example, installing smart meters so they can
access time-of-use tariffs, and participate in trials like the Demand Flexibility Scheme, off-peak energy usage will receive a boost which will save money and take pressure of the National Grid.

Furthermore, the report calculates that those householders who adopt self-generation and energy storage to be used during high-cost periods could potentially save hundreds of pounds from their annual energy bills. Even households that don’t take part in flexible energy usage would see an overall reduction in their electricity bill as a result of a more efficient system.

The modelling shows that the UK could avoid the need to build the equivalent of four additional gas-fired power stations in 2030 if householders were to embrace flexible electricity usage. The benefits of this would also be felt on a national scale. Not only would there be cost savings of £2.5 billion but there would also be significant environmental benefits for communities. The need for upgrades to the electricity wires and infrastructure would also be reduced with the potential of saving almost £1billion in 2030. 

Sara Higham, Director at Smart Energy GB, said: 

“The debate on how we can meet the country’s growing demands for electricity often focuses on how we create more national infrastructure to generate more energy to meet demand, but this report clearly shows that there is another side to this debate: enabling and incentivising consumers to use the energy we generate in a more flexible way.
This report clearly demonstrates the benefits of flexible energy use and the pivotal role played by smart meters in creating a flexible energy system. More than half of GB households now have a smart meter and the benefits to individuals and the country as a whole will only increase as installations continue.”

According to this latest study the UK could not only save a substantial £14.1 billion by 2040 by embracing flexible energy usage but it would also contribute to a 45% decrease in carbon dioxide emissions.
The financial benefits would come from reduced electricity costs during peak demand periods. 

The energy regulators have now asked for input from stakeholders on how to help consumers in adopting flexible energy consumption practices.