Market reform and flexibility: Navigating the new domestic decarbonisation landscape

Over the last two years, the economic environment for domestic decarbonisation has been undeniably difficult. High interest rates, rising labour costs, and a cost-of-living crisis have dampened enthusiasm for low-carbon tech adoption. And with recent policy changes like the removal of the Energy Company Obligation (ECO), the landscape continues to shift.

What does this all mean for the future of warm homes?

Baringa’s ninth Green Buildings and Transport Forum on 3 December 2025 brought together a range of market players to discuss this question.

Market reforms are creating new opportunities…

The removal of ECO has dominated the headlines, but key market reforms will have more significant medium- and long-term impacts.

The implementation of Market-wide Half-Hourly Settlement (MHHS) is set to rewire the incentives for suppliers, finally making flexibility valuable at a household level. By settling on customers’ actual half-hourly usage rather than standard ‘profile classes’, suppliers will be forced to manage their real imbalance exposure. This creates stronger incentives for time-of-use tariffs, automation, and smart consumption. 

Baringa modelling of a typical EV household suggests that, based on today’s prices, there will be a £500 annual differential in peak vs off-peak energy supply costs (based on 2.3 MWh of home charging across a year at 5pm on a weekday versus overnight pricing). If suppliers can turn this savings into a compelling proposition, consumers will benefit from real avoided cost (rather than just marketing discounts). Our discussion showed that suppliers are already positioning themselves to scale smart tariffs to capitalise on opportunities from MHHS. 

Regulatory changes like P415 and P375 are also unleashing a new wave of value-stacking propositions, driving more competition and innovation. P415 gives independent aggregators access to wholesale markets, while P375 enables behind-the-meter metering, opening the door for non-retail suppliers to deliver flexibility. 

Jack Fielder of myenergi noted the significant impact of these mechanisms: ‘Through P415 and with manufacturer-led flexibility, we can save customers an additional £100-150. So in combination with the projected £500 savings from the peak/off-peak differential using a smart tariff, the customer could potentially benefit in the region of £600+ annually.’

…But consumers need help cutting through the noise…

There’s a risk that these changes create more consumer confusion. So while market reforms are opening new ways to create value that benefits everyone, translating that into clear customer benefits remains challenging. 

More complex propositions make it harder to compare tariffs

This complexity goes counter to the primary consumer need: keeping things simple. As Emma Fletcher from Octopus Energy said: ‘We’re increasingly seeing customers taking a month-by-month view of the energy market rather than looking at long-term trends. The most consistent feedback we get is that they want us to keep it simple, which becomes difficult when you’re asking them to compare apples and oranges. They want to think about their energy and low-carbon tech the way they do their dishwasher or washing machine – using it without having to think about how it works.’

Explaining how you’re saving when you’re paying more

Another challenge is communicating bill savings. In the medium term, retail electricity prices could potentially increase due to the £35 billion of energy infrastructure investment needed by NESO on a transmission level, coupled with recently decreasing consumer demand. With electricity prices higher than gas prices, electrification still can increase operating costs. And if unit prices increase after ECO levies are removed from bills, customers won’t feel the savings.

We need to make savings clear and visible, and avoid these being lost in the details of bills. We discussed a range of options for this, including providing separate reward accounts and reflecting savings as line items on bills (similar to the Covid payment).

Ensuring fairness as complexity increases

Fairness remains a critical concern. Our discussion focused on three key aspects:

• Enabling consumers to make truly informed decisions – and providing strong safeguards around data, switching, and redress. This is critical to ensuring the industry doesn’t find itself as the next PPI scandal.
• Helping customers plan proactively – How can the industry help customers plan in advance instead of leaving them feeling forced into knee-jerk decisions when in a distress purchase situation? Home information packs play a role here, as does the idea of a ‘boiler funeral plan’ that has all the heat pump specification complete and ready to implement when a boiler needs replacing.
• Ensuring vulnerable customers can meaningfully reduce bills – this isn’t just about simple propositions, it’s also about ensuring they can benefit from low-carbon tech in a post-ECO landscape. For example, as the market moves toward flexibility, the digital divide threatens to leave vulnerable households behind. Many social housing customers can’t afford Wi-Fi and don’t have a credit history, so they struggle to access smart tariffs.

….And the supply chain needs certainty to drive investment

The transition away from ECO alters the retail market’s operating model. Suppliers and managing agents built large delivery, audit, and compliance teams for ECO, and removing these obligations fundamentally changes their cost stacks, headcount requirements, customer targeting strategies, and routes for delivering home upgrades and retrofits.

Although there was agreement that efforts to address the cost of living are positive, delegates emphasised the need for clear, consistent policy direction. There is fatigue with  the boom-and-bust cycles this market has experienced, and a problem brewing with managing, installing, and maintaining low-carbon tech. For example, in our thought leadership report that we published last year, we shared that there’s a green skills gap of approximately 270,000 tradespeople to meet 2050 net zero targets, but businesses are reluctant to build on shifting sands.

Delegates are looking to the forthcoming Warm Homes Plan to help provide more clarity. Although the ECO changes create uncertainty in the funded market, ready to pay remains in a strong position. There was consensus that private finance is available, and hope that the Warm Homes Plan will provide a point for the industry to align around delivering measures at scale.

Powering through the inflection point

The forum discussion was clear: market reforms are unlocking opportunities. And although the ecosystem must work to simplify customer propositions and safeguard the supply chain, the fundamentals remain strong. As a result, we must continue the momentum – private financing is ready, tech is ready, and the supply chain is capable. Now’s the time to take advantage of these opportunities.

Our next Green Buildings and Transport Forum will be in the spring. If you’d like to join the discussion, get in touch with Rebecca Teasdale or Anjali Armstrong.