Net Zero Transition: Consumer-led Flexibility

I beg to move,

That this House has considered consumer-led flexibility for a just transition.

It is a pleasure to serve under your chairship, Mr Vickers. We have a problem in this country—one that is hitting all our constituents in the pocket, while wasting electricity and pushing up carbon emissions. At the root of the problem is a mismatch between supply and demand. The places where it is cheapest to generate clean electricity are not the areas that consume the most, and our current grid does not have the capacity to move the electricity from one place to the other when demand is high. It was built to transmit power being produced by a limited number of large power stations, not the dispersed renewable energy that provides so much of our electricity today.

As we make ever greater demands on the grid, as we electrify transport and move away from gas for heating, the problem grows, and those demands are not felt evenly throughout the day. In particular, there is a big peak in the evening as people return home from work and school, cook their evening meal, plug in their cars and turn on the heating. Those peak demand periods do not necessarily match the peak supply periods of intermittent weather-dependent forms of generation.

Something has to be done to balance the grid, so how do we deal with the problem currently? We have the farcical situation whereby we all pay producers to turn off wind turbines in Scotland and pay others to turn on gas-powered fire stations in south-east England. Those constraint payments have already cost us nearly £1.3 billion this year, and it is predicted that that could rise to a massive £8 billion by 2030. All of us are paying those costs through our electricity bills. Paying producers to turn off clean power while paying others to burn fossil fuels sounds like madness, but it is the reality.

What can we do to solve the problem? We could fix it by upgrading the grid infrastructure, which needs to happen, but that takes time, and time is not on our side. We could fix it by building new power generation capacity in the areas that need it most, but that cannot be done quickly either, and do we really want to locate renewable energy capacity in suboptimal locations simply to meet local demand?

Fortunately there is an alternative: consumer-led flexibility—a way for households and businesses to flatten the demand, help to stabilise the grid, increase our nation’s energy security and cut everyone’s bills. Unlocking just 10 GW of consumer-led flexibility by 2030 would be the equivalent of a third of the UK’s entire gas power station capacity. It is more sophisticated than the old Economy 7 time-based approach. Smart technology can respond to signals from the grid and to users’ needs.

Imagine someone arriving home from work in their electric car—they do not need to use it again until the next morning, but it is easiest to plug it in when they get home so they do not forget to charge it. Unfortunately, it is the peak period, so they are adding to the peak demand, but with electricity costing the home consumer the same throughout the day, where is the incentive to do otherwise?

With a smart charger and tariff, and a car that can do vehicle to grid—giving power back to the grid from its battery—things could be different. Importantly, from the consumer’s point of view, little changes—they plug in when they get home as usual, and next morning, their car is charged and ready to go. But instead of charging straight away, a smart charger recognises that the car could give back some power now. That helps to boost supply at the time of peak demand, and that supply is being provided right where it is needed, not hundreds of miles away at the other end of an inadequate grid. Then the car is recharged later, when demand is lower.

There are many other, similar scenarios involving battery storage, smart appliances, heat pumps and thermal storage in homes and workplaces, which are all ways to intelligently shift energy use to times when it is cheap, clean and abundant. The upsides are huge, not least because, by cutting constraint payments and reducing the investment needed in new and upgraded energy infrastructure, the potential is there to cut bills for everyone, not just those who can participate.

The MCS Foundation estimates that consumer-led flexibility could cut £375 from the average household electricity bill by 2040. It can be deployed more quickly than building new infrastructure. It can reduce carbon emissions by reducing the need for gas. It can increase grid resilience, enhancing our energy security, and it can create jobs and growth, with UK companies exporting their know-how abroad.

I declare an interest: I worked on RIIO-ED2 for the Northern Powergrid and on its business plan for the current price period. The hon. Lady mentioned the pace and speed of flexibility, and the whole concept behind that plan was flexibility-first. Flexibility has been talked about for a long time in the industry. Does she agree that what we need now is real urgency to make it happen?

I absolutely agree, and I am coming to those points.

The Government have set out a clean flexibility road map, and E.ON has found that 84% of people want more control over energy, so what is the catch? It might be said that this is all well and good for affluent consumers, who can afford the smart technology—the electric cars, battery storage and heat pumps, and the washing machines and dishwashers with timers so that they do not have to get up in the middle of the night to switch them on. It is all right for those who are digitally literate and for those who have heard of smart tariffs—let alone got their head around how they work. What about those who do not fit into those privileged categories? How does consumer-led flexibility fit with a just transition?

A report by the MCS Foundation in August found that 78% of people are unaware of schemes that reward households for reducing energy use at certain times and 41% are unlikely to switch to tariffs offering cheaper electricity outside peak times. If only a privileged few can access flexibility, will it deliver the potential benefits or simply place more of a burden on those already struggling to pay? It has the potential to lower all bills—as previously mentioned—by driving costs out of the system. That benefits even those who cannot participate. But we need to do more. To achieve the scale of change necessary, we need more action from the Government.

About three in 10 homes still do not even have smart meters, and the Government concede that, in those that do, one in 10 is faulty, while others put the figure even higher. That does not bode well for the roll-out of more advanced smart technology. What about the digitally excluded? The Government should oblige energy suppliers to engage with digitally excluded groups and those on low incomes on the benefits of flexibility. Does it not make comparing tariffs more complicated? Potentially it does, so why not support a “try it and see” approach by requiring energy suppliers to offer risk-free trial periods for time-of-use tariffs?

I remind Members that they should bob if they wish to be called during the debate.

It is an honour to serve under your chairmanship, Mr Vickers. I thank the hon. Member for Thornbury and Yate (Claire Young) for securing this debate.

As we know, the Government have declared a clean power 2030 mission, which aims to achieve a target of 12 GW in consumer-led flexibility. Earlier this year, the Government also published their landmark “Clean Flexibility Roadmap”, which I fully support and which formally recognises consumer-led flexibility as essential for energy security and will lower bills for more than 4,000 households in fuel poverty in my constituency. I have campaigned extensively, over my whole parliamentary career, on fuel poverty. I cannot beat the Minister, who comes from Scotland, but the north-east tends to be one of the colder parts of the UK, so that issue is very important. Consumer-led flexibility is essential for a just transition. Unlocking just 10 GW of consumer-led flexibility by 2030 is equal to a third of the UK’s entire gas power station capacity.

I will start by highlighting some of the impressive developments taking place in my constituency of Washington and Gateshead South. Nissan is leading the way by developing electric vehicles, while AESC is currently building a second battery plant in my constituency, supported by a Government-backed £1 billion funding plan, which will be the UK’s largest gigafactory. Those are proud additions to the north-east’s already impressive manufacturing history. EVs are an example of the smart technology we need to shift energy use intelligently to times when it is cheap, clean and abundant, as the hon. Member for Thornbury and Yate mentioned.

Nissan has also boldly embraced wind power to supplement its power supply. Across the UK, however, we are not using that energy efficiently. Octopus Energy has found that we are currently wasting more than £1.2 billion a year paying wind farms to turn off and gas plants to turn on. More broadly in the north-east, we are pioneering solar energy through companies such as Power Roll, while former coalfield communities such as mine are exploring mine-water heating as a potential heat and energy source of the future, rooted in our past.

My hon. Friend is making an excellent speech, talking about different types of emerging technology. We have had solar panels on domestic roofs for more than 30 years, yet our electricity grid is not ready for new types of technology. Does she agree we should have started flexibility earlier, with the emergence of the solar revolution? Consumer flexibility will create those jobs and give people a stake in the electricity market.

My hon. Friend makes a good point. Sadly, we could only start once we came into government. We can see that more should have been done over the past 14 years. At least we are now in government and heading in the right direction.

As a leading alternative for homes where heat pumps are not yet viable, heat batteries support consumer flexibility by storing energy at cheaper, off-peak hours and releasing it on demand. Consumers should also be rewarded when renewables are plentiful, which is an increasing proportion of the time. Perhaps the Government should investigate the final consumption levies and network costs to allow consumers to be paid for using power. That would be a tangible benefit of the green transition that they could feel in their pockets, which is very important to our constituents.

I warmly welcome the Government’s appointment of the UK’s first flexibility commissioner, following campaigning by organisations such as the Association for Decentralised Energy with its ADE: Demand initiative. The commissioner’s role will be to champion this agenda across government, Ofgem and NESO, providing the accountability and leadership that have been missing. There is more work to be done, but I welcome the positive steps the Government are taking and their recognition that consumer-led flexibility is essential for both energy security and a just transition.

It is always a pleasure to serve under your chairship, Mr Vickers. I thank the hon. Member for Thornbury and Yate (Claire Young) for leading this debate and for setting the scene incredibly well. It is always a pleasure to see the Minister in his place; I look forward to the helpful and positive remarks he always makes. It certainly gives a lift when he answers the questions, and I am quite sure he will do likewise today.

Lower your expectations.

No, no—upwards! Everything upwards. It is also a pleasure to see the shadow Minister, the hon. Member for Mid Buckinghamshire (Greg Smith), in his place and I look forward to his contribution as well.

Consumer-led flexibility is so important. It refers to ordinary households and small businesses adjusting their energy use to support a cleaner and more resilient energy system. Who does not want that? It is about how we make it happen, however, and whether there is a cost factor to it. Can people make the changeover—the transition, so to speak—in a way that achieves the goals but does not inhibit their pocket financially in the way it sometimes might?

The cost of energy has been such a huge issue nationwide. I know from my constituents that it is a real problem. The two things that affect them more than anything else are the price of foodstuffs and the cost of energy. Especially as we head into winter, the cost of energy becomes a critical factor. It is about balancing one’s income at the end of the month to ensure that all those things are covered. For my constituents, that is a real problem with increasing costs and consumption, so it is good to have an opportunity to represent them in this Chamber today.

I always add a Northern Ireland perspective to the debate, and I know that the Minister always endeavours to reply to us in Northern Ireland on how Westminster can help, so it is important to put that on the record. For a just transition in Northern Ireland, any move to low-carbon energy systems must be fair, affordable and supportive of communities reliant on older heating fuels.

My hon. Friend has just touched on affordability. Would he agree that, by and large, people across communities—whether in Northern Ireland or across the UK—want to embrace green energy and be environmentally friendly, but they do not want to pay a massive premium to attain a goal that is unrealistic in the timeframe? The important thing is reconciling those two things to bring the community with us.

I thank my hon. Friend for that; it was my next point. He is right: I have not met anybody who does not want to improve the environment or support the net zero targets, but they want to do so in a way that does not disadvantage them inadvertently. It is very important that we try to achieve that.

Back home in Northern Ireland, this is crucial, because of the point that my hon. Friend referred to. We have a very specific issue in that 68%—two thirds—of Northern Ireland homes use oil heating, which is more than anywhere else in the UK. Fuel poverty rates are also historically high, I suspect, as a result. I have oil in my house, as do all the farmhouses in the countryside, and there is very little access to gas except on specific estates in Newtownards and perhaps a bit in Ballynahinch and Saintfield as well.

Furthermore, according to the 2023 update from housing statistics, only about 39% of dwellings have a rating of band C or higher, especially in rural areas, which is a very large section of my Strangford constituency. Few homes have access to gas in Northern Ireland and there are no alternative decarbonisation pathways, so we have to be realistic about trying to achieve the goals in a way that does not bring people down to not only fuel poverty but poverty overall.

I welcome the Government’s commitment to try to address some of those things, but perhaps the Minister can give us some ideas on how we can help our constituents in Northern Ireland—both mine and those of my hon. Friend the Member for East Londonderry (Mr Campbell).

The hon. Gentleman is outlining a range of issues that make it difficult for people to reduce their bills. Does that not highlight the benefit of flexibility, because it would give people greater control, empower them and give them information, so that they can control their bill as best as possible? That is why we have to lead with a flexibility-first approach.

The reality is that, although people subscribe to the idea and wish to develop the net zero targets, it is about how that sits in their pockets. That is the ultimate goal that people reflect on. I am no better than anybody else, and my constituents are telling me—as I am sure they are telling every other MP in here—that Christmas is coming. I stay across the river at the Park Plaza hotel, and I asked a guy last night, “Are youse busy today?”, and he said, “No. It’s much quieter than it’s been for a long, long time.” He surmised that it was because it is Christmas and people are cutting back. It is the same back home. As I said before, I have not met anybody who does not want to achieve the net zero goal, but it is about how the Government help them to reach it.

There are income inequalities and geographic inequalities in Northern Ireland, and they interact strongly with affordability—it is a key issue. There is also poor uptake of smart meters in Northern Ireland, so many people end up paying way more as a result of estimates. That is another critical factor. The Minister travels to Northern Ireland regularly, so that might be an opportunity to get his thoughts across to the relevant Minister back home on how we can achieve some of these goals.

When we talk about consumer-led flexibility, the conversation must be about giving households the ability to shift their energy use to cheaper, cleaner times of the day. There are things that can be done, and things that the Government are helping people with, which I know the Northern Ireland Assembly are also trying to take advantage of, but when it comes to smart technologies and fairer tariffs, and generating or storing energy locally, how can they be achieved? That vision will work only if ordinary people can access and afford the technology and infrastructure required, but too many households are being left behind. Rural households face higher charges and costs, and the up-front expense is simply too much. I know that this is a critical issue, but we can never move away from thinking about affordability, as my constituents tell me.

It is a pleasure to serve under your chairmanship, Mr Vickers. My hon. Friend the Member for Thornbury and Yate (Claire Young) has made the case extremely well. I think I have heard unanimous opinion around the Chamber that we should not only do this, but do it now with some urgency. Flexibility first is the way to go. I will go one level further than the hon. Member for Strangford (Jim Shannon), who called this a “win-win”: I would call this a win-win-win. We can shave £1.3 billion off infrastructure costs through actions like this, which will be reflected in every single person’s bill. That is a massive win. It is also a win for producers because it is easier to balance production and consumption, and it is a win for individual consumers who will reduce their individual prices. It is three wins in one. Why would we not want to do that?

I absolutely agree with the hon. Member for Leeds Central and Headingley (Alex Sobel)—we should have done this yesterday. The best time to plant a tree was 10 years ago; the second best time is now. We are at the point of the second best time, but let us use this time and make sure that it happens. I join my hon. Friend the Member for Thornbury and Yate in pushing the Government to take action urgently.

When preparing for this debate, I remembered a geography school trip I went on where we looked at last-century solutions for balancing the grid. We went to visit Dinorwig, which is a pumped storage system—or was; I am not sure it is still going—in the hills in Wales. During the night, it pumps the water from the lake at the bottom of the hill up into a corrie at the top—aptly, as it turns out. As was quoted in the ad break in the middle of “Coronation Street”, when people switched on their kettles and created a power surge, that system could switch on in 30 seconds and provide significant amounts of power into the grid. It was a very good solution, but it is last century’s solution. What we need is an information-based solution, an individually empowering solution, such as we are talking about here, with consumer flexibility coming first.

The hon. Member makes a point about a modern solution. I have felt for some time that our supermarkets, with the installation of bi-directional chargers, could offer consumers the opportunity to bring their mobile energy source—their EV—as a power supply during peak times for supermarkets; in return, consumers could be offered a discount on their shopping for that hour. When the Minister makes his comments, I would welcome his thoughts on whether we need to go further with bi-directional chargers in supermarkets.