One thing is clear: DNOs will play greater coordination role in energy efficiency.

For years, energy efficiency has been seen as someone else’s job – government, suppliers, or local authorities. But Ofgem’s sector-specific methodology for the upcoming ED3 price control period (2028–2033) makes clear that Distribution Network Operators (DNOs) are expected to “play a greater coordination role” in energy efficiency.

In essence, the ED3 methodology casts electricity networks not merely as passive infrastructure providers but as active enablers of the UK’s energy transition, with clear responsibilities and funding mechanisms to invest strategically and proactively in a decarbonised future.

It’s a regulatory signal that networks must do more to enable energy efficiency as a system benefit, not merely as a side effect of consumer action. The reason is simple: the energy system no longer begins and ends with supply. It now lives in the demand side – in homes, businesses, and communities where electrification is reshaping consumption profiles. “If you’re serious about decarbonisation and avoiding network overload, energy efficiency isn’t optional,” says Harry Taylor, Partner Lead for Energy Networks at Baringa. “It’s a strategic necessity.”

That necessity is already visible. As electrified heating and transport increase peak demand, networks need to consider reinforcements unless they can reduce or shift load. In this context, efficiency becomes a form of distributed infrastructure; a resource to be coordinated, just like flexibility.

The current energy efficiency challenge is not about isolated interventions, but systemic change. With households adopting electric vehicles and heat pumps at a growing pace, the grid must respond, not only by building out infrastructure, but by coordinating smarter demand. This coordination extends to aligning investment strategies with real-world behavioural patterns and social priorities, particularly when it comes to vulnerable customers.

From passive facilitator to active enabler

The shift in role is not about DNOs installing insulation or replacing boilers. It’s about creating the conditions for energy efficiency to scale. That means convening partners, guiding investment, sharing data, and aligning network plans with place-based retrofit delivery. As Charlotte Johnson, Director of Research and Analysis at the Centre for Sustainable Energy, puts it, “We’re not asking networks to become retrofit delivery agencies. But they hold the keys to make delivery possible. They have the insight, access, and planning coordination. They are in a good position to build trust.”

In projects like SSEN’s Equal LCT, which is exploring how to facilitate access to LCTs for consumers likely to be left behind in the energy transition, networks are already testing how energy efficiency can be rewarded in similar ways to demand flexibility. By offering service payments to households whose upgrades reduce peak demand, DNOs can treat efficiency as a grid support mechanism. “The value is in the deferral of reinforcement,” says Ross Bibby, SSEN’s Project Manager for Dynamic Networks. “If a more efficient home enables a smaller heat pump, we can lower peak loads and delay costly upgrades.”

Simon Anderson, CEO of the Local Energy Markets Alliance (LEMA), hopes this model will ultimately evolve into a broader platform. “What if we treated efficient, electrified homes as locally networked distributed energy resources (DER) assets – as part of the system? That’s a mindset change for networks.” Anderson believes this shift could catalyse new commercial frameworks. “We’re starting to see the contours of an energy services economy. Networks are uniquely placed to design the market signals – not just for big industrial players, but for households, social landlords, and community organisations.”

“We’re starting to see the contours of an energy services economy. Networks are uniquely placed to design the market signals – not just for big industrial players, but for households, social landlords, and community organisations.”

Simon Anderson, CEO, Traxis Group and the Local Energy Markets Alliance

Networks are also increasingly expected to build coalitions. That includes coordinating with suppliers, aggregators, and retrofit companies to deliver joined-up solutions. However, without a neutral actor to steer integration, consumer journeys risk becoming fragmented and ineffective. The Equal LCT project has been helpful, highlighting just how data-driven targeting of retrofit – based on network constraints – could yield savings for both consumers and the grid. But it also exposed just how complex delivery can be. “The systems were there,” says Bibby. “But translating that into real outcomes for households required collaboration far beyond the traditional remit of a DNO.” He adds that this will be explored further as part of SSEN's work on its new business plan. The network is also engaging with felllow members of LEMA.

From passive facilitator to active enabler

The shift in role is not about DNOs installing insulation or replacing boilers. It’s about creating the conditions for energy efficiency to scale. That means convening partners, guiding investment, sharing data, and aligning network plans with place-based retrofit delivery. As Charlotte Johnson, Director of Research and Analysis at the Centre for Sustainable Energy, puts it, “We’re not asking networks to become retrofit delivery agencies. But they hold the keys to make delivery possible. They have the insight, access, planning coordination and, increasingly, trust.”

In projects like SSEN’s Equal LCT, which explored how to facilitate access to LCTs for consumers likely to be left behind in the energy transition, networks are already testing how energy efficiency can be rewarded in similar ways to demand flexibility. By offering service payments to households whose upgrades reduce peak demand, DNOs can treat efficiency as a grid support mechanism. “The value is in the deferral of reinforcement,” says Ross Bibby, SSEN’s Project Manager for Dynamic Networks. “If a more efficient home enables a smaller heat pump, we can lower peak loads and delay costly upgrades.”

Simon Anderson, CEO of Traxis Group and the Local Energy Markets Alliance, hopes this model will evolve into a broader platform. “What if we treated efficient, electrified homes the way we treat distributed energy resources (DER) assets – as part of the system? That’s a mindset change for networks.” Anderson believes this shift could catalyse new commercial frameworks. “We’re starting to see the contours of an energy services economy. Networks are uniquely placed to design the market signals – not just for big industrial players, but for households, social landlords, and community organisations.”

“We’re starting to see the contours of an energy services economy. Networks are uniquely placed to design the market signals – not just for big industrial players, but for households, social landlords, and community organisations.”

Simon Anderson, CEO, Traxis Group and the Local Energy Markets Alliance

Understanding what motivates action

Treating households like DERs only goes so far. The realities of consumer behaviour don’t always align with system logic. Financial incentives – even generous ones – aren’t always enough. “Retrofit isn’t like installing a smart meter,” says Dr Steve Hall, Senior Industry Research Fellow at York University. “It’s intrusive. It’s unfamiliar. Even when it’s free, many people say ‘no’. So, if you design around payback periods, you’re missing the point.”

Dr. Rose Chard, Senior Advisor at Energy Systems Catapult, agrees. “People retrofit when it aligns with their life, not just their wallet. Warmth, health, pride in their home – these are the real drivers. Financial incentives help, but they don’t lead.”

This insight should inform network strategy. Rather than assuming people behave like rational economic actors, DNOs can enable schemes that offer multiple entry points, not just the cheapest kilowatt-hour of electricity saved. “The most effective approach is a ‘tapas menu’ of options,” Hall suggests. “Let people choose what fits their life stage, housing type, and values. Networks can help curate that menu by working with local authorities and community groups.”

Chard emphasises that a consumer-centric approach is also a resilience strategy. “If we build schemes that only appeal to early adopters, we miss the bulk of households, especially those in vulnerable situations. That’s where networks must show leadership.” And while DNOs may not directly engage households, their planning assumptions, incentive structures and partnerships shape the experience people have when engaging with the energy transition. If the market only supports high-income homeowners, that’s a system failure, not a consumer choice.

Designing for scale: Place versus archetype

Another question networks must consider is how best to scale energy efficiency. Should interventions be rolled out street-by-street, building local trust and visibility? Or should they target specific archetypes, such as electrically heated apartments or off-gas homes, for quicker wins?

For Johnson, the answer is both. “Archetypes help with technical planning and messaging. But the social dimension is local. When your neighbour makes changes, you start thinking about it too. That’s how awareness and confidence spreads.” It is a point reinforced by Taylor who argues that when networks are already upgrading infrastructure in an area, “that’s the perfect moment to align retrofit delivery. It’s efficient and visible for the industry. But the timing, understanding and financial outlay won't work for all – so how do customers still have the option to adopt later on? Most of important it has to be simple. Simple from a customer perspective not industry”.

Anderson goes further. He believes a street-by-street approach could unlock new delivery models. “Why not bundle domestic LCT upgrades with shared assets, like local batteries or heat networks? You reduce per-unit cost and build community benefit. Networks, supported by GB Energy’s community energy initiatives, could help promote and enable this as part of a role to enhance active energy efficiency as being called for by Ofgem in ED3.”

This dual lens – localised social momentum and data-driven targeting – might enable smarter planning. It also supports better alignment with planning authorities, distribution future energy scenarios (DFES), and community action plans. In a fragmented retrofit market, this cohesion could prove critical. The archetype model also plays well with regulatory structures. DNOs can help identify where existing schemes like ECO4 or the Home Upgrade Grant align with grid priorities. These intersections are where coordination can create step changes in impact.

A Utility Week Intelligence report in association with Scottish & Southern Electricity Networks