The world of grid-supplied energy is changing. Our predominant reliance on mains gas to heat our buildings cannot continue if we are to get back on track with reducing our carbon emissions. There is a growing acceptance that hydrogen will not be able to be sustainably produced in sufficient quantity to provide a wholesale replacement for the natural gas that is currently piped into our homes and businesses. Instead, we must now look to electricity to supply our heating needs via (in most cases) heat pumps.
A similar process is underway with private transport, with the progressive phasing out of petrol and diesel in favour of electrification in the form of hybrids and EVs. Hydrogen may still provide an interim solution for heavy transport whilst battery technology catches up with the demands of dragging 44 tonnes over long distances without frequent stops for recharging.
We already have an electricity grid in the UK of course, however much work needs to be done to supply zero-carbon electricity by the government’s target date of 2030. The obvious change is a shift away from electricity generation from gas-fired power stations towards renewable generation, with coal generation now already fully decommissioned. Plans to expand our onshore wind and solar generation have taken a big step forward with the recent change of government, however we still need to get that renewable power to consumers – this is more challenging than it may seem at first glance.
Imagine for a moment a scenario where London workers had tired of living in the city and had decanted wholesale to live in the misty valleys of the Chilterns, Cotswolds and South Downs. After a few years their bosses had grown sceptical of the advantages of work-from-home culture and insisted employees were back at their desks (hmmm, perhaps this will not need too much imagination after all). As a result, every morning and evening the narrow back roads of Gloucestershire and the Home Counties get completely gridlocked with reluctant commuters for whom the car is the only realistic option of getting to the nearest train station.
The above scenario is similar to the situation faced by the National Grid. Renewable energy resource is progressively becoming more available, however it is also increasingly challenging to transport this from the (generally) geographically remote wind and solar farms to where it is most needed, particularly London and the south-east of England. Much as the single-track roads of our Home Counties will struggle to cope with a high level of peak-time traffic, so does our electricity grid in its current form.
For the time being, whilst the grid is being upgraded with the electrical equivalent of wider roads and roundabouts, financial incentives in various forms are being used as tools to help manage demand. In much the same way as cheaper off-peak train fares might encourage our reluctant commuters to travel at less busy times of day, energy suppliers are increasingly offering cheaper off-peak electricity for those customers now on smart meters. In a sense this is just an extension of the Economy 7 principle that has for decades provided homes off the gas grid with cheap night storage heating and immersion-based hot water. Modern smart meters now enable much more flexibility around the timing that constitutes “off-peak” – a definition that can change from day to day according to how much strain is predicted on the grid from either demand or renewable generation.
Smart tariffs (sometimes called time-of-use or TOU tariffs) is a generic name for electricity tariffs that offer a variable – and sometimes dynamic – price structure. A number of suppliers now offer power overnight at around one-third of the standard daytime rate – ideal for charging EVs, for example. Smart tariffs, however, come in many forms – for example some suppliers offer cheaper electricity at the weekend when overall demand is lower.
Octopus is perhaps the most progressive supplier with regard to smart tariffs, offering a variety of options depending on your needs as a consumer. Cosy Octopus offers three off-peak periods totalling 8 hours at half-price – these are spread across early morning, mid afternoon and late evening, with the periods designed to allow heat pumps to operate on a cheaper rate when there is lower demand on the grid; in this case there is also a peak evening rate that is around 50% more expensive than the standard rate to discourage consumption at times when the grid is under most strain.
The challenge for consumers is working out the most appropriate tariff for their circumstances. With standard tariffs, comparison was straightforward – so long as you knew your existing tariff name and annual consumption (usually displayed on your bills) you could quickly do a comparison on one of the well-known price comparison websites. Comparing smart tariffs is a lot more challenging due to the many additional factors, for example variable demand due to solar PV, batteries and EV charging along with unpredictable dynamic pricing can make a mockery of any attempt to accurately project costs over a long period of time. Interestingly, the government sponsored a trial for a domestic smart tariff comparison tool, however I am not particularly surprised that all has gone quiet on this front due to the difficulties around providing reliable predictions with complicated patterns of demand and generation.
As a general rule, owners of large properties and those with EVs will tend to have more flexibility in their demand, for example they can choose to charge cars or run powerful pool filter pumps on cheap rates. It is also worth bearing in mind the interaction with solar PV systems, for example with the right export and import tariffs it can be more lucrative to sell your solar PV-generated electricity for 15p/kWh and do your EV charging and pool filtering overnight at 7p/kWh. It is also worth checking that you are not offsetting the off-peak savings with consumption during more expensive peak periods, depending on the tariff structure.
With the exception of traditional Economy 7 tariffs, for most people with smart meters (which are mandatory for signing up to a TOU tariff) and some flexibility in how they use their power, many modern time-of-use tariffs should lead to savings or, at the very least, not be more expensive than a standard variable tariff. If you want to be part of the future and play your part in supporting a dynamic energy system then they are well worth a look.