Our electricity prices have risen 136% since 2010, pushing Britain from around the advanced-economy average to among the most expensive electricity markets in the developed world.
New analysis from the Institute for Fiscal Studies and London School of Economics says one of the quickest ways to cut pressure on bills and the wider system is to make much greater use of flexible, time-varying tariffs.
These tariffs charge different prices depending on when electricity is used, encouraging households to shift consumption away from expensive evening peaks and into periods when demand is lower or renewable generation is more plentiful.
The report calculates that an illustrative household moving 20% of its electricity use from the evening to the morning could reduce the underlying system cost of supplying that household by around 8%.
That does not necessarily translate directly into an 8% bill cut but it shows the potential value of using electricity more intelligently.
The savings come from reducing demand at times when the system may otherwise need more expensive gas generation, additional balancing actions or extra network capacity.
The IFS argues this will become increasingly important as transport and heating are electrified.
Electric vehicles, heat pumps, batteries and smart appliances all create opportunities to move demand across the day without necessarily reducing overall energy use.
NESO’s Clean Power 2030 modelling assumes time-varying electricity consumption will need to roughly triple between 2025 and 2030 as flexibility becomes more important to balancing a system increasingly dominated by wind and solar.
The IFS says Britain’s high electricity prices reflect several factors, including gas costs, network charges, taxes and policy levies.
Its analysis shows household electricity prices rose by 13p/kWh in real terms between 2017 and 2025.
Of that increase, around 7.5p came from energy and supply costs, 1.8p from network charges and 2.8p from taxes, fees and levies.
The report argues flexibility could help reduce some of those system pressures without requiring another major subsidy programme. The challenge is making tariffs simple enough for households to use and ensuring people who cannot easily shift demand are not disadvantaged.
As Britain builds more renewable generation, the IFS says getting consumers to use electricity at different times could become one of the cheapest ways of easing pressure on both the grid and household bills.
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