Authors: Andrew Schein, Director of Trials and Analysis, Yixin Sun, Centre for Net Zero Economist, and Navya Kumar, Guest Contributor

A few months ago, we shared interim results from the first large-scale test of household electricity "demand turn-up": paying people to use more electricity at exactly the moments when energy is so abundant that some of it would otherwise be spilled – i.e., not used. Working with Octopus Energy across Great Britain and Spain, we ran events with 120,000 households to test whether simple financial incentives got people to shift and add consumption into these windows.

But an important question remained: is demand turn-up actually a better outcome than simply curtailing renewable generation? Our working paper tackles that question in a new welfare analysis section.

A recap: households really did respond

When we offered incentives during periods of high renewable supply, households increased demand substantially. In Spain, a 50% discount raised demand by 6% and free electricity by 12%. In Great Britain the effects were larger: 15% for a 50% discount and more than 30% for free electricity. In a related region-specific trial in the north of England, where households actively opted in, free electricity produced a 105% increase from participants. The responses were largest among households with electric vehicles and time-of-use tariffs; we hypothesise these are the households best equipped to soak up cheap power. Some of the extra demand was genuinely new, and some was consumption shifted from just before or after the window.

In short: households were price-responsive. And, the most responsive customers were the low-carbon-technology-adopting households the grid increasingly needs to work with.

The economics of turning up demand

Today, when the grid has more wind than it can carry, the system operator asks wind farms to switch off, a process called curtailment. In Spain, this can be free for the system operator, but costly for generators. In Great Britain, this costs the system operator – and thus eventually the billpayer – hundreds of millions of pounds last year, and the bill is rising. Demand turn-up is an alternative: instead of forcing or paying a generator to stop, pay a household to soak up the surplus. But is that actually cheaper, and is it actually better?

What we found:

1. The main benefit is lower bills for households

When otherwise-spilled electricity reaches a home, the household gets something genuinely valuable – power it wanted – at close to the cost of producing it, which in these surplus moments is approximately nothing, or less if you count the physical costs associated with shutting off wind generation. In practical terms, that could mean heating a home, charging an EV or running appliances that households value, but might otherwise have delayed or gone without. That gap, between what the electricity is worth to the household and what it costs to deliver, is a real gain to the economy.

2. There may be a saving for the public purse too

Turning up demand can substitute for paying generators to turn down, so it can also reduce what the system spends on curtailment. As noted, different systems handle this differently, and in Great Britain, the system operator pays generators to be curtailed. Generators bid such that this payment covers what it would have earned by staying on, including output-based subsidies from schemes such as Contracts for Difference. Thus curtailment is not free for Great Britain’s system operator, and demand turn-up’s central appeal is that it avoids this compensation while letting generation proceed.

That said, the saving is nuanced. When demand turn-up keeps a generator running, the subsidy that curtailment would have avoided is now paid out, partly offsetting the avoided compensation. Correctly netting these flows is central to the cost-effectiveness comparison. But generators can bid above the support they lose – and on average, they do. There are a lot of ways to estimate mark-up; our preferred specification suggests CfD generators bid £11 above their CfD top-up, of which approximately £3 we assume to be a real cost of curtailment (wear and tear) and £8 is strategic. In short, curtailment payments include a surplus over and above simply making them whole.

Recovering this difference is neutral in economic welfare terms – as it reduces costs to billpayers at the expense of profits from generators – but the saving remains highly relevant to policymakers concerned with affordability, public expenditure and who ultimately benefits from the energy transition.

Putting these points together

The societal value of demand turn-up depends on how much you pay households to take part. Pay too much and you're using public money to incentivise behaviour that is barely worth it. Pay too little and you leave valuable demand un-mobilised.

There's a sweet spot, and it sits at a low price: roughly the small physical cost that switching a wind farm down and up again actually imposes (its "cycling" wear-and-tear), which is on the order of £3/MWh for wind, more common in Great Britain, or approximately €0 for solar, more common in Spain. Pay around that level for the wholesale cost of energy and the scheme is, in welfare terms, essentially free: every pound spent returns a pound of value, and the surplus flows through to consumers as lower bills.

This is a bit of a surprise for both sides of a more general policy argument about curtailment:

1. Our model cuts against those who want the system operator to pay significant sums for demand turn-up. We find that the optimal procurement price for them to pay for demand turn-up is very close to £0.
2. Yet, to the people who think demand turn-up therefore isn't worth bothering with, we say it's still valuable.

The reason is that allowing retailers to have that demand turn-up at £0/MWh would allow them to pass through significant savings to customers. Wholesale prices have been, on average, £75 during periods of regional curtailment. Customers in the constrained regions getting their energy for £75 cheaper – and turning up in response – would enable the consumer surplus and fiscal savings we’ve described above.

The size of the prize

Even so, the gains could be substantial, according to our back-of-envelope calculations. In Great Britain, the system operator’s open data on its balancing actions are more granular than in Spain, which allows us to model what would have happened, had demand turn-up been deployed at scale. Looking at all curtailment in Great Britain over one year to 18 February 2026, we estimated what would have happened if all 2.55m households in Scotland were offered a discount on the wholesale energy portion of their retail price – approximately 7.5p/kWh.

Why 7.5p/kWh? That’s from the £75/MWh saving on the wholesale energy. Of course, the typical electricity unit rate for customers is a lot more than that – at approximately 24p/kWh, it’s more like £240/MWh. The difference between £75 and £240 comes from some of the same final consumption levies, including “policy costs” loaded onto electricity unit rates, that we discussed in a very different blogpost a few weeks ago. The upshot is that even a fall in the wholesale energy price to its local marginal cost (of about zero) produces only a modest proportional reduction in the retail price consumers face. The demand-side signal is throttled by tariff structure rather than by the underlying value of constrained electricity. That is a policy issue that DESNZ is exploring.

Notwithstanding this issue, we found £18.2m in consumer surplus that DTU could have unlocked. We also found £9.5m in savings to the public purse, £8.4m of which is lost surplus that generators previously earned from bidding above the support they forgo, and £1.1m is the avoided real costs of curtailment to the generators.

Notes: Blue shows new welfare generated: £18.2m for consumers and £1.1m saving to government from avoided real curtailment cost (£3/MWh). Purple shows negative producer surplus and fiscal savings to the government or system operator, which net out.

In Spain, since generators were never compensated for curtailment, a greater share of the benefits of turn-up accrues to generators than the system operator. However, in both cases, consumers benefit through increased consumer surplus, illustrating that market design affects the distribution of benefits rather than the overall economic case for demand turn-up.

Demand turn-up is a complement, not a silver bullet – but one that is under-used

In Great Britain, this is all theoretically feasible through the Balancing Mechanism, but demand turn-up faces significant frictions there. The system operator, regulator, and the government are actively thinking about how to level the playing field for demand to be a substitute for curtailment. In Spain, participation requirements and market design barriers make it even more difficult for households to participate as grid assets. We think continued reform to enable demand to compete fairly with curtailment is the right move, in both markets.

With all that said, absorbing gigawatt-scale surpluses with residential demand alone would take enormous numbers of participants – in many hours, more households than exist in the country. The realistic consumer-welfare prize from residential turn-up today is meaningful but bounded.

But it is growing. As more homes get EVs and heat pumps – the very households we found respond most – and as large flexible loads like electrolysers and data centres come online, the demand available to soak up surplus expands. Demand turn-up is best understood as a growing complement to storage, grid reinforcement, and yes, some curtailment, rather than a replacement for any of them.