Supporting households to reduce their energy bills when installing different combinations of low carbon technologies and time of use tariffs

Reducing emissions from homes is essential to meeting the UK’s climate change targets. Widespread adoption of low carbon technologies such as heat pumps, solar panels and battery storage is critical to cutting household emissions and reducing dependence on fossil fuels.  

Whether households adopt these technologies depends in a large part on running costs. If they are seen as expensive to run, fewer households are likely to make the switch. This is particularly important in the current context of high energy prices, when many households are concerned with keeping bills down.  

At the same time, households face uncertainty about what savings are possible in practice and how different combinations of technologies used in conjunction with time of use tariffs might affect their energy bills. In a volatile energy market, understanding how to reduce energy bills and limit exposure to price fluctuations has become increasingly important. 

Our research explores the potential energy bill savings available to households from installing different combinations of low carbon technologies and time of use tariffs. 

This briefing considers the policy conditions required to ensure that the potential bill savings identified by the research can be achieved in practice. 

The UK Government’s Warm Homes Plan (WHP) presents low carbon technologies (such as heat pumps, solar panels and batteries) as part of the solution to tackle both the cost-of-living pressures and the UK’s over-reliance on fossil fuels. Analysis by the Department for Energy Security and Net Zero (DESNZ), based on average energy prices for 2024, suggests that households adopting a heat pump, solar panels and a battery could save up to £550 a year on their energy bills, compared to a gas boiler.

Over recent years, the number of time of use tariffs available to households has increased significantly, as well as a range of export tariffs which allow households to sell any surplus energy they generate back to their supplier. While this has created new opportunities to reduce energy bills, it has also made the market more complex and harder for households to navigate. This complexity will increase further with the introduction of market wide half hourly settlement later this year, which will incentivise energy suppliers to offer new services, such as more sophisticated time-of-use tariffs, to help lower household energy bills. 

With the conflict in the Middle East leading to an increase in energy prices from July, we’re already seeing households recognise the need to shield themselves from higher bills. DESNZ figures show a surge in demand for low carbon technologies across the UK since the conflict began; in March alone, there were 27,000 solar installations, two-thirds of which went on rooftops which is the highest in a decade. This is in-line with industry reports of a huge rise in demand for solar, such as the more than 50% increase seen by Octopus Energy.

Our new research explores the energy bill savings available from installing different combinations of low carbon technologies – heat pumps, solar panels and battery storage – and time of use tariffs. The analysis models over one million scenarios to reflect the wide range of heat pump performance, tariff combinations, technology sizes, household occupancy patterns and appliances usage. 

The research shows that while combining technologies generally improves household energy savings and subsequently reduces energy bills, these integrated systems don’t deliver their full potential on standard tariffs. The largest bill reductions are achieved when more than one low carbon technology is paired with a suitable time of use tariff. Importantly, the savings identified do not rely on households changing their heating patters or actively altering their behaviour to respond to tariff signals.  

Key findings include: 

• Tariff choice has a major influence on financial outcomes. Households switching from a gas boiler to a heat pump are far more likely to reduce their energy bills when they move to an appropriate heat pump or time of use tariff. In many cases, tariff switching alone can significantly improve savings without requiring behavioural change. 

• The financial benefits of heat pumps depend on tariff choice, system performance and whether households can fully transition away from gas. In some cases, heat pumps can offer short payback periods, particularly where grants, avoided boiler replacement costs and suitable tariffs are taken into account. However, poorly installed systems may still result in higher running costs. 

• Combining technologies can unlock greater savings than installing individual measures in isolation. For example, homes with a heat pump, solar panels and battery storage can make greater use of low-cost electricity, while combining solar panels with a heat pump can increase the use of electricity generated on site. 

• While battery storage can increase savings and flexibility, current battery costs mean it is not always financially attractive. Adding a battery to a solar panel system can increase bill savings, but often not enough to recover the cost of the battery within its expected lifetime, particularly where households already have access to a good export tariff. Batteries are more financially attractive in homes with higher electricity demand, such as those with heat pumps. 

• Households that install a heat pump, solar panels and battery storage, and operate the system on an appropriate tariff, can achieve the largest reductions in energy bills. In some cases, energy bills were reduced by more than 80% compared with a gas-heated home on a standard tariff. However, high upfront costs mean these systems do not always provide the strongest financial return at current technology costs. 

• Solar panels provide consistent and reliable savings. Across all scenarios modelled, installing solar panels reduced energy bills. The level of savings depends strongly on export tariffs, with the best Smart Export Guarantee (SEG) rates significantly increasing returns. Solar panels generally offer a reasonable payback within their lifetime. 

It’s important to note that savings vary greatly and are dependent on the systems installed and the households’ heating requirement, occupancy pattern and energy behaviours. This research therefore only provides an indication of the potential, rather than guaranteed outcomes for every household. The research was conducted using energy price cap levels experienced throughout 2024.

The absolute value of savings (in £ terms) will vary depending on energy prices. If energy prices rise further, as expected due to the ongoing conflict in the Middle East, the absolute value of savings in £ terms would increase. 

The findings highlight that technology choice alone does not determine outcomes. The scale of bill savings households can achieve depends on how low carbon technologies are combined and the tariffs they are used with. The policy recommendations below set out actions to help ensure these benefits can be realised in practice. 

The range of potential combinations of technologies and tariffs modelled in our research stresses the need for impartial, tailored and personalised advice to help households understand and have confidence in which options are more likely to deliver the best outcomes for their property and circumstances.

This will be particularly important for consumers who are more vulnerable or on low incomes, including those who will receive support to install low carbon technologies through the £4.4 billion worth of grant funding announced in the Warm Homes Plan. Without access to appropriate advice and support, households may make tariff choices that result in higher energy bills than necessary and fail to realise the full savings available from the improvements made to their homes, potentially undermining trust in both time of use tariffs and low carbon technologies.  

Time of use tariffs are still an evolving and unfamiliar part of the energy market, and the tools needed to compare and assess tariffs, particularly where households combine multiple technologies such as heat pumps, solar panels and battery storage, are not yet available.

As market-wide half hourly settlement is introduced and new tariffs emerge, ensuring households have access to both high-quality advice and improved tariff comparison tools will become increasingly important. Together, these will help consumers navigate a more complex energy market, understand the implications of different tariff and technology choices, and make informed decisions that deliver the best outcomes for their circumstances. 

As noted above, the savings modelled in this research do not depend on households changing their heating patterns or shifting electricity consumption to different times of day. However, as the range of time of use tariffs available in the market continues to expand, some tariffs may require more active consumer participation than those considered in this analysis.

Recent research for the Committee on Fuel Poverty highlights that such tariffs may not be suitable for all households, reinforcing the need for advice and support to help consumers identify the most appropriate tariff for their circumstances. 

Making home upgrades as affordable as possible is crucial to ensure that more households can benefit from low carbon technologies and time of use tariffs. Policy approaches across Great Britain, including the UK Government’s Warm Homes Plan and the Scottish Government’s Heat in Buildings Strategy, emphasise the role of grants and low-cost finance in helping households meet the upfront costs of improving their homes. 

Our research shows that existing grant schemes already provide important support across Great Britain, with the UK Government’s Boiler Upgrade Scheme grant and the Scottish Government’s Home Energy Scotland Grant and Loan Scheme playing a significant role in making heat pumps more affordable for households. Alongside these, fuel poverty schemes in Scotland (Warmer Homes Scotland) and Wales (Nest), provide additional targeted support to low income households.

As grant and finance schemes continue to evolve, national and local governments should consider how support can best enable households to access the range of low-carbon technologies that can maximise bill savings when combined with appropriate time of use tariffs.  

It will also be critical that the UK Government’s proposed new consumer loan offer is available at very low or zero interest rates in order to make it an attractive option for households and support the uptake of multiple measures in homes. 

Much of the bill saving potential identified in this research relies on households being able to access time of use tariffs. While some time of use tariffs, such as Economy 7, do not require a smart meter, access to the growing range of smart tariffs available in the market relies on households having a functioning smart meter.

According to the latest government data, around 70% of homes and small businesses in Great Britain have a smart meter, with 64% operating in smart mode, although uptake remains lower among some groups, with only around 55% of private renters having a smart meter. 

It will be important to maintain momentum on the smart meter rollout, while also ensuring that solutions are available for households where a smart meter cannot be installed or where connectivity issues prevent it from operating in smart mode. Ensuring that these households are not excluded from opportunities to benefit from more flexible tariffs will be important in delivering the widest possible consumer benefit.