Blog | Christian Calvillo, Antonios Katris, Paulina Gonzalez and Long Zhou | Nov 2025
As the UK's energy system undergoes unprecedented transformation toward net zero, understanding how tariff design can support both affordability and energy security is becoming urgent. Our ongoing research (as part of our UKERC project) highlights complex trade-offs in balancing decarbonisation, equitable access, and economic growth via social tariffs. This phase of work deepens that inquiry, examining smart, flexible tariffs and drawing on the complementary expertise of EDRC's flexibility research and CEP's economy-wide modelling capabilities.
Why does this research matter now?
Energy tariffs are fundamentally changing. The rollout of smart meters has made time-of-use (TOU) pricing technically feasible, renewable energy integration is creating new flexibility opportunities, and the need to support vulnerable consumers in the energy transition remains pressing.
Yet critical questions remain unanswered: How can we design tariffs that encourage beneficial flexibility while protecting those who cannot shift their energy use? What is the potential for household flexibility in the short, medium and long term? How should we balance revenue recovery with fairness and affordability?
Our research aims to provide policymakers, industry and other stakeholders with robust, evidence-based insights to navigate these questions.
Understanding smart tariffs and household flexibility potential
Smart tariffs, also known as dynamic, flexible, or time-of-use (TOU) tariffs, adjust prices based on real-time demand and supply conditions. Using smart meters, these schemes encourage consumers to shift energy use to off-peak hours when prices are lower, and grid demand is reduced. The benefits can be substantial: international evidence shows that households on TOU tariffs can reduce electricity costs by 10–15%, while peak demand reductions of 5–10% ease strain on transmission and distribution infrastructure.
Yet, realising this potential depends on understanding who can participate and how much flexibility is available across different household types and building stocks.
Research suggests significant flexibility potential exists in UK households, but its distribution is uneven. Flexibility varies by:
- Building type and tenure: Detached homes with advanced technologies (heat pumps, EV chargers, batteries) offer greater controllable loads than flats, where space constraints exist and coordinating multiple owners' whole-building systems remains challenging. Renters face particular barriers, as they often lack control over heating systems and appliances, while also lacking the power to make decisions on significant interventions in the properties they rent.
- Income and socio-economic status: Wealthier households are more likely to work from home, and to own flexible assets (electric vehicles, solar panels, battery storage), while having the financial capacity to invest in smart home technologies. Lower-income households, conversely, may lack work flexibility, smart appliances or the upfront capital required.
- Medical and care needs: Households with specific energy requirements, such as those with medical equipment, residents requiring greater heating regimes (e.g. people with disabilities or the elderly), or poorly insulated homes, have limited flexibility. For these households, shifting energy use is not a viable option.
Our modelling is exploring scenarios examining how consumer participation in smart tariffs might scale, how much flexibility different household segments could realistically provide, and how aggregated flexibility could support system-wide decarbonisation. Early analysis suggests that while household flexibility could contribute meaningfully to peak demand reduction, potentially avoiding billions in network infrastructure costs, its distribution across the population remains deeply unequal without careful policy design.
Exploring synergies: can social and smart tariffs work together?
A central focus of this phase is investigating whether efficiency gains from smart tariffs could reduce system costs in ways that ease the financial burden of supporting social tariffs. Could widespread household flexibility lower grid operating costs and infrastructure requirements sufficiently to offset the expense of targeted social support?
Different households need different support. A household with an elderly member who requires consistent heating might benefit from a social tariff with a subsidised standing charge or a baseline energy allowance. A renter with an EV might benefit more from a time-of-use tariff encouraging overnight charging. Our research examines how tariff portfolios, rather than one-size-fits-all solutions, could better serve diverse needs.
A particular challenge involves recovering network and supplier costs in an era of changing flexibility. Standing charges have grown in recent years, driven by increasing transmission and distribution network costs. Yet, high-standing charges disproportionately burden low-consuming households of often elderly, disabled, or low-income consumers. Rethinking how costs are recovered and how standing charges interact with social tariffs is essential.
A critical consideration is ensuring that the transition to flexible systems does not widen inequality. If only affluent households with solar panels, batteries, and EVs can benefit from flexible pricing while vulnerable households bear the costs of network upgrades to accommodate it, equity will suffer. Our work investigates how to design flexibility mechanisms that benefit all consumers, including those without advanced technologies.
Toward the Flexible Tariffs Workshop: a forum for co-design
The Centre for Energy Policy, in collaboration with the Energy Demand Research Centre (EDRC), is pleased to announce an upcoming online roundtable workshop. This event will bring together policymakers, energy industry partners, consumer advocates, and researchers to explore critical questions emerging from the next phase of our research under Work Package 4 of the UK Energy Research Centre (UKERC) programme.
We will present preliminary findings and engage stakeholders in co-designing policy and research pathways. This workshop will:
- Introduce the research landscape: state of evidence regarding flexible tariffs, household flexibility potential, and international policy lessons.
- Explore flexibility futures: analysis on the scale and distribution of household flexibility to 2030, 2040 and beyond, considering different levels of consumer participation and technology deployment.
- Discuss tariff design options: participants will examine options of tariff combinations, assessing their distributional impacts and feasibility.
- Disseminate UKERC and EDRC's flexibility research: highlight findings from consumer flexibility studies, including stated choice experiments and agent-based modelling work, ensuring that consumer perspectives are central to tariff policy design.
The workshop will be held online on 8 December 2025 and will be open to policymakers, energy suppliers, consumer groups, network operators, academic researchers, and civil society organisations. We welcome participation from anyone interested in contributing to evidence-based tariff design that supports affordability, equity, and a just energy transition.
Join the conversation
For more information about the workshop, to register your interest, or to discuss collaboration opportunities, please contact:
Centre for Energy Policy team
cep@strath.ac.uk
Image credit: Getty images