America News Agency

More than half of the world's population lives under such an energy system, which proponents say could tackle fuel poverty, improve the crumbling housing stock and reduce energy demand, all at no cost to taxpayers if designed correctly.

The rising progressive tariff or national energy guarantee system (NEG) is virtually unknown in Europe but has been successfully implemented in many countries and regions, from Japan, South Korea and China to Bangladesh, India and California.

"The idea is simple: the first block of energy, calculated to meet basic needs from heating to cooking to lighting, is either discounted or free. The cost per unit then increases with additional blocks, meaning wealthier households with excessive or non-essential consumption pay more.

According to its advocates, this system has numerous benefits: It helps those on the lowest incomes reduce or eliminate fuel poverty by obtaining affordable energy to meet their basic needs, from heating to cooking to light.

Excess consumption, often linked to wealthier households, is charged at a higher rate, subsidizing the cheaper tariff. Everyone is encouraged to reduce consumption and improve their homes with insulation, smart technology, and other energy-efficient measures to stay on the cheapest block.

According to its supporters, another advantage is that the lowest tariff can be directly linked to the expansion of renewable energy. In this scenario, cheap wind and solar power would determine the size of the lowest tariff, which would then be shared among all consumers, giving the public a direct stake in the transition to a low-carbon energy system.

Experts say the current energy pricing system in Europe and the UK is in urgent need of an overhaul after the energy crisis caused by Russia's invasion of Ukraine plunged tens of millions into fuel poverty.

The crisis has forced European countries to pump billions of pounds into energy markets. In the UK alone, the government has introduced an energy price guarantee (EPG), considered the most expensive energy policy in history, costing around £20 billion.

Governments in the UK and Europe are now considering wholesale energy market reform to reduce exposure to international fossil fuel fluctuations, encourage demand reduction, and support renewables.

Enter the rising block tariff, also known as the rising block tariff or national energy guarantee. According to Alex Chapman, a senior economist at the think tank New Economics Foundation, who recently published a paper on the potential of the National Energy Guarantee scheme, there is growing interest in the idea in the UK and across Europe. "Huge amounts of cheap, new renewable energy will be connected to the grid over the next few years, in the UK in particular, thanks to the new government's plans for onshore wind and solar."

He argues that this energy should be directed to a new rising block tariff rather than being lost in national consumption. "The first block of ultra-cheap energy should be available to every household in the country as a dividend from our national mission to net zero," he adds.

However, less confident assessments of the benefits of this system, which is widely used in water and energy services around the world, exist.

Jörg Mühlenhoff, head of the European energy transition program at the German think tank Heinrich-Böll-Stiftung, said there is growing interest in the EU for a radical energy market reform.
He said he supported some form of progressive tariff reform but that "the devil is in the detail".

"How do you define the right amount of electricity for the lowest block? What is a household? is it based on the number of adults, and do you take into account health sensitivities—we still have a lot to work on."

He said the ideal model would be a low-cost block to meet basic needs, while higher rates would be linked to fluctuating market rates and energy production. This would not only incentivize energy efficiency but also steer consumers away from using electricity at times of high demand or when renewable generation is low.

"In addition to tackling the cost of living crisis, we need a system that allows people to take advantage of the potential of renewable energy so that they have access to enough electricity for basic needs, but at the same time, they know that when there is a lot of wind, a lot of sun, the wholesale market prices will be lower, so it is the right time to run your electrical appliances, your electric vehicle, your electric heat pump, etc.," he said.

Mühlenhoff said a reformed energy system could have wider benefits given the rise of populist parties across the EU and in the UK.

Mühlenhoff said: "You need to ensure that the benefits of the transition to renewable energy reach households and people can see it in their bills. "Otherwise, as we saw during the European election campaign, the far right, the populists will take this issue and campaign against the energy transition, when in reality, if we get it right, the transition to renewables, energy efficiency, is the answer to a lot of the problems that people are having."