The State of Consumer Energy Tariffs: What’s in Store for 2025

The State of Consumer Energy Tariffs: What’s in Store for 2025

As the year comes to a close, we wanted to share our take on the current state of consumer energy tariffs in 2024 and predictions for 2025.

Where We’re At

The energy market is maturing, and we’re seeing a shift from innovation-driven propositions to mass-market solutions. As we move beyond the early adopter phase, here are some key trends shaping the landscape:

1. Time-of-Use Tariffs Lead the Way
   Time-of-use tariffs offer minimal friction for consumers, requiring no additional effort. However, certain tariffs, like OVO’s Charge Anytime, necessitate hardware installations such as charging points, which can create barriers. Despite this, we expect their popularity to grow significantly over the next year as the technology becomes more accessible.
2. The Rise of EV-Specific Tariffs
   With the diverse needs of EV owners, no single tariff suits all consumers. Energy providers are responding with a range of tailored tariffs and add-ons, catering to different lifestyles, risk tolerances, and high-usage assets. This segmentation will continue to expand.
3. Impact of the Demand Flexibility Service (DFS)
   Initiatives like the DFS, which reward customers for reducing electricity use during peak times, have proven effective and boosted consumer engagement.
4. Trust Is a Sliding Scale
   Consumers are more likely to trust energy companies with control over certain assets, such as batteries, compared to more critical systems like heat pumps. This suggests that trust is asset-specific rather than a blanket concern.
5. Customer-Centric Promises Build Trust
   Companies that prioritise consumer preferences will gain trust. For example, OVO’s Comfort Promise—ensuring customers’ homes remain comfortable while optimising energy use—sets a strong benchmark.
6. Seasonal Context Matters
   Timing is crucial when launching new tariffs or add-ons. The impact of initiatives like DFS is much greater in winter than in summer. Energy providers must factor this into their strategies.

Where We’re Going

The focus for 2025 will be overcoming technical and behavioural hurdles to achieve seamless management of energy across multiple devices in the home. Here’s what lies ahead:

1. Interoperability Challenges
   Managing diverse home devices like EV chargers, heat pumps, and batteries requires tailored solutions rather than a one-size-fits-all approach.
2. Consumer Reluctance
   Research by LCP Insights shows that around 70% of the market is still hesitant to allow energy companies to control their home assets. Overcoming this mistrust will be a significant hurdle.
3. Trust Levels Vary by Asset
   Consumers are more open to ceding control over batteries but less comfortable with handing over heat pump control. EVs fall somewhere in between. Building trust will require demonstrating tangible benefits and minimising perceived risks.
4. Customer-Centric Optimisation
   Promises like OVO’s Comfort Promise, which guarantee no compromise on comfort, can help win over sceptical customers. Using tools like weather data and predictive analytics to optimise energy usage without inconvenience will be key.

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Looking Ahead: Key Areas for 2025

As the energy market continues to evolve, three areas will dominate innovation over the next year:

1. Interoperability
   Expect new tariffs designed to manage multiple home assets in harmony, addressing the unique consumption profiles of each device.
2. Expanding Eligibility
   Dynamic tariffs have so far been targeted at homeowners with solar panels, EVs, or heat pumps. In 2025, we anticipate a shift towards making solutions accessible to broader segments, such as flat owners. For instance, battery storage solutions could allow flat owners to store energy during off-peak hours.
3. Multi-Directional Charging
   With advancements in CCS (Combined Charging System) technology, multi-directional EV charging will become more viable. This will pave the way for innovative tariffs that optimise vehicle-to-grid energy flows.

Next Steps

Digital products and services are crucial to successfully delivering these propositions to consumers. Rapid prototyping and real-world testing are the best ways to understand what resonates with your audience. By shortening feedback loops, organisations can quickly adapt and align their offerings with consumer needs.

If your organisation is looking to explore the future of energy tariffs or test new propositions, get in touch to learn more about our rapid prototyping programmes. Let’s build the future of energy together.