The transition to a cleaner, smarter energy system offers real opportunities to tackle social injustices head-on, protecting consumers from future price shocks, reducing bills and improving overall health and comfort. But to realise these benefits, the retail energy market must evolve in ways that are inclusive, transparent and responsive to the needs of all consumers. Our recent work with Consumer Scotland explores how this can be achieved. Drawing on a wide-ranging evidence review, we identified four key foundations for a future retail market that supports a fair and effective transition.
The UK energy system is undergoing rapid and fundamental changes to achieve its critical net zero targets. These changes will impact all corners of the economy and society – including how people use and interact with energy in their homes and communities.
The retail market will play a pivotal role in enabling a just consumer transition. As the main interface with consumers in the energy system – i.e. who we buy our energy from and pay our bills to – suppliers will need to evolve to deliver the new tariffs, services and protections that enable people’s switch to low-carbon energy fairly and affordably.
Of course, this transition is happening against a backdrop of historically high energy prices, driven by the rising cost of gas, which exposed deep and persistent inequalities in our energy markets. More than 980,000 households were estimated to be experiencing fuel poverty in Scotland as of 2023, equivalent to 39% of all households, with UK-wide energy consumer debt exceeding £3.7 billion as of winter 2024. ,
980,000 Number of households in fuel poverty in Scotland – 39% of the total
£2.7bn Amount added to bills during the energy crisis of 2021 and 2022, when 29 suppliers failed
£3.7bn UK-wide energy consumer debt, as of winter 2024
The energy crisis also exposed deep issues of supplier resource and resilience. Between 2021 and 2022, 29 suppliers failed due to soaring wholesale prices, affecting more than four million consumers and adding £2.7 billion (approximately £94 per household per year) to bills through the ‘supplier of last resort’ mechanism. UK and Scottish government intervention was essential to ensure consumers could pay their bills and suppliers could stay afloat. Public spending exceeded £50 billion for the 2022-23 financial year alone.
These figures reflect more than just rising prices – they point to a precarious energy retail market that has struggled to adequately protect those most exposed to harm when crises like these happen. The impacts go beyond bills: cold, damp homes and unaffordable bills are linked to poor mental and physical health, rent and mortgage arrears, supplier debt, social isolation and increased pressure on public services.
Figure 1. Impacts of different net zero barriers
The net zero transition creates scope for new drivers of vulnerability, inequality and exclusion in the retail market. It is no coincidence that those experiencing the sharpest impacts of the crisis and fuel poverty (a phrase that was first coined in the UK in 1979) are also the people and communities most at risk of exclusion or disadvantage as we decarbonise homes, towns and cities.
While decarbonising our energy system will reduce our exposure to volatile international fossil fuel markets and exploitative geopolitics, there are a range of challenges and barriers faced by low-income, marginalised and disadvantaged communities that could lead to deepening adverse outcomes if left unchecked:
Capital costs of new technologies. The high costs of low-carbon technologies such as heat pumps will make the transition challenging for those on lower incomes, leaving them more exposed to future fossil fuel price shocks.
Electricity prices. While discounted low-carbon heating tariffs do exist, standard-rate electricity for a typical consumer in Great Britain remains four times higher than gas prices today, which risks increasing heating costs for some households.
Potentially limited ability to flex energy demand. Making the most of time-of-use tariffs may be challenging for people who cannot flex their demand at peak times with low prices, such as single-parent households or shift workers (e.g. nurses).
Digital exclusion and literacy. Almost 3 million UK households still lack access to the internet, with a further 11 million people citing that they do not have basic digital skills such as email and browsing.
Rising network and policy costs. In particular, the expected increase in gas network decommissioning costs could fall on a dwindling number of lower-income and vulnerable consumers who cannot afford to electrify their home heating demand.
Increased risk if things go wrong. People in vulnerable, low-income, or disadvantaged circumstances already face tough social, economic, health and personal challenges, which could be worsened if new technologies or services fail to meet their needs.
Pressures of poverty and socioeconomic disadvantage may limit capacity to engage with new technologies and behaviours. In addition to affordability, wider stressors may create additional challenges in time, resources and ability for those in more complex, vulnerable or marginalised circumstances to engage with novel or innovative services.
If we get it right, the transition to a cleaner, smarter energy system offers real opportunities to tackle these injustices head-on. A more resilient, renewables-based supply will help protect consumers from future price shocks and reduce our reliance on fossil fuels. Innovations in technologies, services, tariffs and markets can create new value for those at the sharp end of injustices today, reducing bills and improving overall health and comfort.
But to realise these benefits, the retail energy market must evolve in ways that are inclusive, transparent and responsive to the needs of all consumers.
Our recent work with Consumer Scotland explores how this can be achieved. Drawing on a wide-ranging evidence review, we identified four key foundations for a future retail market that supports a fair and effective transition.
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1. Reshape retail market incentives around key consumer outcomes
Historically, the retail energy market has focused on driving down costs through competition. While this has delivered some benefits, it has also limited innovation and left many consumers underserved – particularly those with more complex needs, less money to spend or limited access to digital services.
A future-facing market should prioritise outcomes that matter to people: comfort, reliability, affordability and ease of use. This means encouraging suppliers to develop services that reflect the diversity of consumer circumstances and enable everyone to benefit from new services – and to avoid disadvantage if they cannot participate as actively as others, avoiding the creation of a two-tier system. Innovation should be guided by real-world needs, not just price points.
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2. Future-proof fuel poverty support for a changing system
As the energy system evolves, so too must the support for those in fuel poverty or at-risk of disadvantage. Fuel poverty support today is reactive and disjointed, operating in ‘firefighting mode’ to address the very real and immediate issues people face.
As governments rethink their fuel poverty support programmes, including consideration of a social tariff, it is imperative that they are designed with the future in mind – helping people not only afford energy but also participate equitably in the new system. For Regen’s thinking on this, see our response to the UK government Fuel Poverty Strategy Review consultation.
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3. Strengthen consumer protections across new services
The shift to smarter, more digital energy services brings new opportunities, but also new risks. Consumers need clear, consistent protections, whether they’re using a traditional tariff or a dynamic pricing model, a heat pump or responding to a local flexibility event.
Consolidating and updating consumer protections will be essential. This includes making it easier for people to understand their rights, access support, and resolve issues when things go wrong. For those in vulnerable circumstances, protections should include a commitment to avoid harm – or a ‘no detriment’ policy – ensuring that participation in new services doesn’t lead to higher costs or reduced access.
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4. Address digital exclusion to ensure broad participation
Digital tools like smart meters and apps are becoming central to how people engage with energy, from managing usage to accessing new tariffs. But millions of people in the UK still lack internet access or the skills to navigate digital systems.
Improving digital inclusion must be a shared priority across government, industry and civil society. This includes investing in digital skills, supporting community-based advice services, and ensuring that non-digital options remain available. A smart energy system should be accessible to all, not just those with the latest technology.
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Looking ahead
The transition to net zero brings with it both challenges and opportunities. By focusing on the needs of consumers, particularly those who are currently underserved, the retail market can play a central role in delivering a system that is not only cleaner, but also fairer and more resilient.
These four foundations offer a starting point for that journey. They are not a complete solution, but they provide a framework for thinking about what a future retail market should look like and how it can work better for everyone.
