New research released by McKinsey & Company reveals that the recent fall in UK energy prices could accelerate the energy transition with many energy consumers now willing to switch to new suppliers, flexible energy tariffs and green products and services to cut household bills.

The McKinsey B2C Customer survey of more than 2,000 UK consumers reveals that a recent fall in wholesale prices has seen a third of consumers considering switching suppliers and almost half willing to adopt energy-saving partial time of use (ToU) tariffs or ToU tariffs with warnings (49 percent and 48 percent respectively). This comes after the National Grid ESO’s Demand Flexibility Service (DFS) recently ran demonstration trials indicating an imminent shift to a flexible UK electricity grid. A quarter of consumers are also willing to buy additional green products and services from energy retailers such as energy management services, solar panels, electric vehicle chargers and heat pumps.

In the wake of record-low supplier switching rates of 3% over the last 18 months, the survey indicates falling wholesale prices are spurring UK consumers to seek low-cost alternative suppliers and services. Competitive prices were among the biggest drivers for potential switchers and the recent wholesale price drop will for the first time allow energy retailers to offer tariffs below the government price cap.

The research also reveals the proportion of consumers willing to switch services could increase dramatically if energy providers tackle cost concerns, increase customer awareness, and simplify processes. This indicates an opportunity for suppliers to attract more customers and diversify their offerings by curbing costs, simplifying processes, and boosting public awareness of new energy products and services.

Kiril Bliznakov, Senior Partner at McKinsey & Company said: “The findings point to falling wholesale prices driving a more competitive market where low-cost and low-carbon tariffs, products and services will be the key differentiators of the future. Balancing the need to keep energy costs low and comply with Ofgem decarbonization regulations will require an umbrella strategy aimed at cutting combined costs and carbon emissions across the energy value chain. The ‘gamification’ of energy services and rising demand for energy-as-a-service offerings will create new opportunities for suppliers to increase long-term customer loyalty and to both decarbonize and cut household bills.”

McKinsey pinpoints three pillars suppliers could focus on to gain first-mover advantage in the emerging UK energy market including:

  1. Ensure customer satisfaction. Low-cost-to-serve digital channels and technologies such as AI could boost customer satisfaction and build consumer trust to sell them new offerings that decarbonize home heating. Those that lead the way in selling new green products that deliver a ToU tariff could simultaneously lower household bills and increase incremental revenue
  2. Offer green energy products: With consumers seeking more sustainable products, retailers could diversify by bundling their offerings with new products and services such as solar panels, heat pumps, E.V chargers, and energy management services. Green energy products could become a critical enabler for retailers to lower household bills in combination with new commercial arrangements.
  3. Encourage Time of Use tariffs: Energy retailers could harness new commercial offerings to reduce both hedging risks and consumer bills. The key is to offer well-designed, easy-to-understand, flexible ToU tariffs that both cut consumer costs and offer enough price certainty amidst a more fluctuating energy system.

To read McKinsey’s findings in detail, click here.