When you sit down at the kitchen table to review household spending, the energy bill is often one of the most significant expenditures. And as the world grapples with the urgent need to transition to a net-zero future, this bill is set to rise significantly. According to our analysis, the total investment required to achieve net zero by 2050 is a staggering $115 trillion. This includes $53 trillion in clean-power generation, $42 trillion in transmission and distribution, and $20 trillion in interim fossil fuels and alternative technologies. The challenge is clear: energy providers must balance an affordable transition with a timely one. But how?
The energy provider's dilemma
As noted above, the scale of investment needed to achieve net zero is colossal. If energy providers were to shoulder these costs alone, it would more than double electricity costs as a percentage of household income. This is simply not sustainable for most consumers. Our global research of 16,800 energy consumers shows that while 81% believe the energy transition is important, only 46% are willing or able to pay more on their monthly bill. This gap is even more pronounced among low-income households, where 54% cannot or will not pay more.
Indeed, on average, energy consumers said they would only be willing to pay a 9% to 10% increase in their average monthly energy bill for the transition. However, keeping the transition affordable risks delaying net zero by 35 years.
We’re also already seeing a perfect storm for a spike in energy bills. Energy demand is increasing (driven in part by demand from data centers amid a boom in gen AI), geopolitical disruption pushed prices up, weather events are more frequent and severe, and the cost of capital is rising. Most of these factors, coupled with supply chain disruptions and inflation, have driven energy prices to record highs. Consumers are already struggling to pay their bills, and the prospect of further increases is daunting. Yet, the transition to net zero is not just an environmental necessity; it's a moral imperative. We must find a way to make it affordable and inclusive for all.
Strategies for an affordable net-zero transition
To navigate this complex challenge, energy providers must lead the charge. They are the best-positioned orchestrators of this transition, responsible for balancing equitable access to affordable electricity with the reliability and security of the energy system. We have identified five strategies that can lay the groundwork for a sustainable and affordable net-zero future:
1. Meet consumers where they are
Energy providers need to understand and embrace the unique needs and values of their consumers. This means moving beyond generic sustainability messaging to build a more sophisticated, engaged consumer relationship. Energy providers will need to leverage data, generative AI and consumer research to deeply understand individual needs, values and worldviews. With this insight, they are better equipped to precisely tailor their outreach, using the most effective messages and the most relevant channels, to persuade each consumer and ultimately inspire the level of widescale consumer action required to meet net-zero goals.
2. Always start with the consumer
Energy providers must recenter their business around the consumer. This means restructuring operations across the customer lifecycle, breaking down silos to better meet consumer needs, and match each consumer with the right clean energy solutions, including those who can afford green premiums, those who cannot and those who are indifferent. This strategy will also reshape their business model to recognize the increasingly blurred lines between energy consumer and producer.
3. Relentlessly optimize
An affordable energy system is a lean operation. Energy providers must reinvent their ways of operating and improve productivity through aggressive technology reinvention. This includes scaling AI across the business to automate low-value tasks, prioritize high-value consumer interactions and streamline operations across the revenue cycle. Additionally, by embedding innovation in their capital investment planning process, energy providers can explore cost-effective alternatives and secure flexible financing options.
4. Grow the business
Energy providers can mitigate cost pressures by exploring new revenue opportunities. This involves maximizing existing assets and capabilities, providing new value-added products and services such as home energy storage and electric heat pumps, with the proceeds helping to offset costs from other decarbonization efforts, including expansion into new verticals like clean hydrogen, carbon capture, utilization and storage (CCUS), and advanced communications infrastructure. By developing innovative revenue-sharing mechanisms to offset the costs of net-zero investments in generation and grid infrastructure, energy providers can earn the trust of consumers and regulators.
5. Orchestrate the energy ecosystem
Affordability cannot be solved in isolation. Energy providers must advocate for and act on equitable, policy-enabled change. This involves educating the energy ecosystem on core industry challenges and helping to shape policies that safeguard affordability. By working closely with regulators and policymakers, energy providers can create a more sustainable and inclusive energy ecosystem, but such public-private collaboration requires strategic focus, practical governance and rigorous project management.
Leading the charge
The transition to net zero is a shared responsibility, but energy providers must lead the way. The five strategies I outlined above will not fully resolve the complex challenge of balancing energy affordability for consumers with an affordable energy system for providers. However, they will lay the foundation for meeting this challenge head on, if energy providers act now. The journey is challenging, and the clock is ticking, but with the right strategies and collaboration, we can ensure that the transition is not only on time but also fair and effective for all.
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