How to be green might not be top of the agenda for most energy consumers right now. Householders are facing devastating price increases arising from the biggest energy crisis of our lifetimes.

With predictions of a rise in the energy price cap to £5,386 by the start of next year, there is a very real risk that 42% of households could be in fuel poverty without further major intervention.

It’s clear that bold action is needed by government to mitigate the worst impacts of this crisis. This is without doubt the top priority for the new administration.

But uncomfortable as it might feel, now is also the time to grasp the medium- to longer-term challenges facing the energy retail sector, especially the challenge of how retail propositions should change as we move away from relying on gas and other fossil fuels.

Truly radical change is needed in how people use energy in their homes and time is running out. While we are all aware of the scale of the net zero challenge, the steady progress to date has focused upstream, in terms of shifting to more renewable sources of power. This has required little, if any, effort by consumers. But net zero is coming home, so to speak, and work will be needed by retailers to unlock action required at the household level.

As the chart below shows, the uptake of low carbon technology in homes will need to significantly ramp-up by 2035. And how we use energy may need to change too: BEIS estimate that increased flexibility – such as the ability to reduce demand when supply is low, and vice versa – could reduce overall electricity costs by up to £70bn by 2050.

Energy retailers need engaging propositions to support householders to decarbonise

The coming decade will be a crucial time for household action, if we are to have any chance of meeting our targets. This means that energy retail propositions must make easier for consumers to access affordable, secure and low carbon energy. We need energy retailers to develop new commercial strategies now, supported by enabling changes to the policy framework for retail energy. We can’t put change off any longer.

This means that it is vital that action for the short-term is consistent with this longer-term direction of travel and doesn’t undermine energy retailers’ ability to support householders in the net zero transition. What is done in the coming weeks and months should be designed to improve resilience for the coming years and decades.

That’s why having a vision for the future now is so important. Our report, Clean Energy Retail – The role of Energy Retailers in the net zero transition, which we developed in collaboration with staff from OVO energy, aims to contribute to this debate.

Energy retailers will have a key role to play as the main interface between householders and a highly complex energy system. The “propositions” – products and services – they develop and rollout must make it easier for householders to access affordable, secure and low carbon energy. We have attempted to paint a picture of the propositions needed to achieve this. For example, new tariff offerings to help manage demand through the day; service bundles to unlock investment in low carbon assets like heat pumps; and collaborations with community and other local groups.

Many of these propositions have, in some shape or form, already been made available to householders, and there are some excellent examples. The Octopus Agile Tariff gives access to half-hourly energy prices tied to wholesale prices. Ovo Beyond combines green energy with tree-planting. Sero provides services to homeowners and tenants to ensure homes are comfortable and cheap to run. Moixa’s GridShare enables smart energy management using a software platform to connect storage devices to the grid. These and other offers need to be “mainstreamed” and much, much more innovation will be required. But by setting out a vision for the future, we can start to identify how to get there.

This starts with a call to action for energy retailers, who will need to reassess and enhance the relationship they have with their customers. As well as new propositions, whole new commercial strategies – including alternative revenue models – will be needed, as will new and diverse partnerships across the sector and beyond. All this will have implications for the companies’ skills, capabilities and recruitment.

Policy reform is needed to unlock these changes

But there are limitations to what energy retailers can do within the existing policy and regulatory frameworks. We need reform to unlock innovation, allowing retailers to develop offers that incentivise people to make low carbon choices and become more flexible; making interaction in the energy system simple and easy for householders whilst maintaining trust; and making the transition to clean energy accessible for all householders. We have identified ten energy retail reform priorities:

1. “Carbon standards” for householders (combined as a package of incentives and financing support) and / or suppliers should be considered to drive positive low carbon behaviour. Similar intervention in road transport has significantly boosted the uptake of electric vehicles.
2. Wholesale market reform to enhance price signals. If we want consumers to use electricity when it’s best (more efficient for the system / lower carbon), we need them to be able to share the benefits, but the current arrangements dampen the incentives of doing so. Some of the REMA options have potential to fix this.
3. Strengthen green tariff frameworks. Green tariffs have been important in helping to boost the use of low carbon electricity but now we have a carbon intensity target, clarity is needed for householders to ensure they continue to contribute to additional green benefits. It will also be important establishment of a more granular market for Renewable Electricity Guarantees of Original (REGOs).
4. Speed up the rollout of smart meters. A baseline requirement to reach flexible consumer demand, we should aim for 100% penetration as soon as possible.
5. Simplify the customer experience. Bills (or e-bills) will need to present the information householders need in a simple way. Consent processes will need to be streamlined while maintaining protections. Data will need to be easily shared and devices interoperable.
6. Redefine the roles of energy retailers. We will continue to need energy retailers to be the primary interface with an increasingly complex energy system. But we should rethink what are the core functions that only they can do, and what could be done better in partnership with other entities.
7. Improve how we measure competition. Currently overwhelmingly focused on ease of switching retailers, we need more sophisticated measures of competition that reflect the outcomes desired for consumers and allow long term relationships to be developed.
8. Improve data access. Data and digitalisation has the potential to unlock significant value in the energy sector. In additional to the recommendations put forward by the Energy Data Taskforce and Energy Digitalisation Taskforce reports, Ofgem should mandate Open Energy as an industry wide data sharing mechanism and work with industry to identify critical data assets. We should also work to build personal net zero data profiles for consumers. By building up an accurate picture of the customer’s decarbonisation needs (subject to data permissions being granted) the energy company provides information about suitable decarbonisation action (e.g. where insulation would be appropriate; when a heat pump could usefully be installed etc.).
9. Update consumer protection measures. As energy retail propositions become more sophisticated, so must the safeguards to protect consumers from new harms (including price fluctuation, cybercrime and data protection).
10. Introduce smarter approaches to fuel poverty. Data and digitalisation should be used to improve the identification of fuel poor householders and effective targeting of interventions.

It is beyond the scope of our paper to recommend specific solutions for the immediate period, and other commentators have made various sensible suggestions. But it is essential that action for the short-term aligns with the medium- and longer-term vision for energy retailers. Delivering net zero and building resilience to future crises requires great innovative energy retailers and we must maintain a pathway to robust retail sector, with strong incentives aligned to save both carbon and cost.