Report urges UK to make time-varying energy tariffs default

A joint report from the Institute for Fiscal Studies (IFS) and the London School of Economics (LSE) has found that the vast majority of UK households remain on flat-rate electricity tariffs that do not reflect significant variations in generation costs. The research, published as part of the IFS Green Budget and funded by the Nuffield Foundation, argues that making time-varying tariffs the default for all consumers could lower bills, particularly as electric vehicle adoption grows. The report highlights a stark geographic and temporal divide in electricity costs. Power generated in Scotland is often effectively free due to frequent high winds, sometimes requiring the grid operator to pay wind farms to switch off turbines to prevent overloading. Conversely, during peak demand, especially in the south of England, costly gas-fired generators must be paid to increase supply. Currently, only about 10% of households and firms are on time-varying tariffs. Researchers recommend the government allow time-varying tariffs to become the default for all households, which would give consumers stronger financial incentives to shift electricity use to off-peak hours.