The choices and actions of consumers are going to have a big impact on how we meet Net Zero targets. Consumers being engaged with the energy system is crucial to achieving Net Zero in the most cost-effective way.

This chapter is in four sections: residential, transport, industrial and commercial.

Key Insights from the Energy Consumer

Energy consumers across the residential, transport, industrial and commercial sectors need to be enabled to make changes in how they interact with the energy system. Changes in consumption behaviour, smart technology take-up, markets and policy will all be needed to ensure that the energy needs of consumers are met in a way that is clean, secure, affordable, and fair.

  • A decision on the use of hydrogen for residential and commercial heat needs to be made by the Government’s 2026 deadline to give certainty to consumers on the most appropriate low carbon heating technologies for their homes and businesses.
  • Electrification of existing fossil fuel energy demand, particularly for heat and transport, and growth in electricity demand in new sectors, will increase annual and peak electricity demands. This will require strategic investment in electricity generation and energy network infrastructure to meet this demand.
  • Appropriate policy support needs to be put in place to support consumers to improve energy efficiency of their homes and businesses. This will help reduce energy bills via lower annual and peak energy demands. Policy support will also be crucial to overcoming infrastructure challenges that currently present barriers to uptake of low carbon technologies such as heat pumps.
  • Smart technology and demand side flexibility can help mitigate the increase in peak demands from electrification, optimise the whole energy system and thereby reduce consumer energy costs. This will involve the adoption of smart meters and Time of Use Tariffs by residential consumers, smart charging of Electric Vehicles and increased industrial and commercial participation in Demand Side Response.
  • All types of energy consumer need to be enabled to engage in the whole energy system of the future. Appropriate market signals need to be put in place to incentivise flexibility from consumers that is unlocked by digitalisation and smart technology.
  • Policy gaps in support for energy efficiency and low carbon heating technologies (and associated supply chains) are the biggest barriers to decarbonising residential heating. Current policy commitments will not be enough to drive the technology shifts and consumer uptake for Net Zero.
  • Reductions in the higher up-front capital costs for heat pumps are needed, as well as policy interventions to support uptake and allow the market to create new propositions for consumers.
  • Electrification of heat could lead annual residential electricity demand increasing by 50% by 2035 and peak demand doubling by 2050, requiring more electricity generation and network capacity to support this.
  • Demand for hydrogen for residential heating in System Transformation could require up to four fifths of today’s residential gas demand to be used for methane reforming by 2050, requiring appropriate infrastructure and supply development.
  • Where hydrogen is primarily produced from electrolysis, our modelling indicates this is likely to be less cost-effective for use in home decarbonisation at scale compared to heat pumps without significant policy intervention to reduce costs. Consumer Transformation has no residential end user demand for hydrogen.
  • Consumer engagement with smart appliances and thermal storage will be important to help mitigate the increase in peak residential electricity demand from electrification of heat.
  • Consumers in some parts of the country may have more choices available to them for decarbonising their heating, due to factors such as proximity of infrastructure. Urban areas, for example, are more likely to be connected to district heating and hydrogen when compared to rural areas. This will influence how technologies are rolled out or supported.
  • Hydrogen for residential heating in System Transformation and Leading the Way is developed initially around hydrogen clusters and then rolled out more widely as the hydrogen network is built out.
  • We expect adoption of Battery Electric Vehicles (BEVs) to be the most common way to decarbonise cars and vans, with the role of hydrogen being less certain and varying across scenarios.
  • Electrification of transport leads to increased annual electricity demands in all scenarios, but lower overall energy demand as electricity displaces petrol and diesel. Electric Vehicles (EVs) have much higher efficiency and travel further on one kWh of electricity than one kWh of petrol, so total energy demand reduces. Overall transport demand is lowest in scenarios with the most electrification of transport.
  • Sales of electric cars are accelerating, but further action is needed to meet the Government’s target for no new sales of petrol and diesel cars by 2030. While government and local leaders have announced measures to help increase uptake of lower emission vehicles, challenges remain around consumer adoption, such as the up-front costs and the availability of charging infrastructure.
  • All new Heavy Goods Vehicles (HGVs) are zero emission by 2040 in the Net Zero scenarios. Earlier dates are hit in our Net Zero scenarios for vehicles under 26 tonnes. Rapid uptake of zero carbon HGVs in the 2030s in line with government targets leads to significantly reduced energy demand for freight and much lower emissions. There is a high level of uncertainty in peak demands for HGVs, as it is unclear to what extent HGV charging will be able to avoid use of electricity at peak times.
  • Enabling consumer engagement in smart charging and Vehicle to Grid technology, both for passenger electric cars and larger vehicles, will be crucial to minimise increases in peak demand and requirements for network reinforcement.
  • We expect that the economic impact of the events in 2020 and 2021, together with current high energy prices, will lead to suppressed electricity and gas demand in the short term.
  • Developments in the industrial sector suggest that electrification and fuel switching to hydrogen may take place further and faster than previously thought, with fuel switching expected to accelerate from the late 2020s onwards.
  • Industrial clusters for Carbon Capture Usage and Storage (CCUS) and hydrogen could reduce whole system costs and the need for additional electricity and gas network investment. However, cluster locations must be carefully designed to maximise use of existing network infrastructure and avoid exacerbating system constraints. A shift towards locational marginal pricing, as explored in our Net Zero Market Reform work, could incentivise more efficient siting.
  • Industrial Demand Side Response (DSR) could shift up to 36% of peak industrial electricity demand away from peak demand periods or times of low renewable output with sufficient levels of consumer engagement.
  • We expect that the economic impact of the events in 2020 and 2021, together with current high energy prices to lead to suppressed electricity and gas demand in the short term.
  • In the commercial sector, electrification is frequently more cost-effective than hydrogen for decarbonising heating, even in System Transformation.
  • We expect high growth in energy demand in some sectors such as commercial data centres. This could represent up to 6% of GB electricity demand by 2030, up from around 1% today. However there still remains considerable uncertainty in the range of the final energy demands for this sub-sector.
  • In scenarios where hydrogen is used for commercial heating, this is likely to grow first around dedicated hydrogen clusters in the early 2030s.
  • As for residential demand, it is possible that there won’t be any hydrogen used for commercial heating as reflected in the Consumer Transformation scenario, with hydrogen use prioritised for other sectors.
  • Demand Side Response from commercial premises, primarily through use of thermal storage, could shift up to 28% of electric heat pump demand away from peak in 2050.