Tax rebates and cuts in stamp duty could be better methods of encouraging transformation in the UK energy market, according to a Warwick Business School academic.

Dr Frederik Dahlmann assistant professor of global energy at Warwick Business School believes that more radical solutions are required if the UK is to meet the huge challenge of moving to a low-carbon energy market.   

Dahlmann notes that consumers are being hit by rising energy prices as the transition to low-carbon energy begins. However, Dahlmann believes that businesses and homeowners should be better encouraged to produce their own energy.

He explained: “To create a genuinely open electricity market to attract new energy entrepreneurs and ‘prosumers’ – companies and individuals that are both electricity generators and consumers – perhaps a different set of financial incentives are needed, ones that would make investments in energy infrastructure more immediately attractive.

“How about tax rebates for all companies and stamp duty offsets for homeowners that invest in decentralised energy generation such as rooftop solar and wind, or in energy efficiency measures?

“The aim should be to make the energy market more democratic by increasing the ways in which people choose and participate in, finance, and benefit from the decentralised solutions to the energy market’s problems, rather than leaving this to government and the ‘Big Six’.”

Dahlmann believes that the rise of homeowners using solar PV will serve as an example. Under the feed-in tariff system the UK has already seen 1.6GW of capacity installed across domestic roofs in the UK.

Dahlmann added: “Many industry commentators would argue that to solve the complexities and challenges involved in producing and consuming energy in the future we will need much more proactive engagement from the public and from the industry

“Specifically, what’s needed is a greater sense of ownership and responsibility for our energy; where it comes from, its significance to our livelihoods, and the economic and environmental costs involved. Such an arrangement should encourage many more homeowners, businesses, and local communities to benefit from a fundamentally open electricity market by raising their awareness of the various technological options available, but also allow them to share in the gains.

“The energy bill’s Electricity Market Reform (EMR) creates incentives in the form of guaranteed electricity prices for various means of generating electricity…Behavioural science tells us that, especially with incentives whose pay-off lies in the distant future, people are often unwilling to make the investment now for a payback later.”