A study by Octopus Energy has demonstrated the benefits of time-of-use tariffs, with customers on the new Agile price model shifting electricity consumption out of peak periods by 28%, helping them save significant amounts of money in the process.
In August 2018, we wrote about the rise of time-of-use tariffs being offered by energy suppliers. We also discussed the potential benefits of these next-generation energy price models, particularly in terms of how they incentivise consumers to change their consumption habits, enable them to save energy and money, and in turn, help Britain avoid costly upgrades to the grid.
These advantages have now been clearly demonstrated in a new report by Octopus Energy, which looked at the effects of its half-hourly time-of-use tariff for households – a UK first when it was launched in March. The study found that it has had a “significant impact” on customer behaviour.
Octopus’ Agile tariff provides its smart meter customers with prices reflecting actual wholesale energy costs in each half-hour settlement period. This includes passing on negative prices – the process of paying customers to consume energy when the grid is oversupplied.
The supplier says the tariff is designed to “interact with the smart products of the future, shifting usage away from peak times to reduce pressure on the network and accelerate the uptake of electric vehicles”.
What did the Octopus study find?
The report states that after six months of using the Agile half-hourly time-of-use tariff:
• Customers shifted electricity consumption out of peak periods by 28%, suggesting that wider uptake of smart time of use tariffs could significantly shift overall demand at peak times, which would bring huge system benefits.
• On average, engaged consumers reduced their peak consumption by 15.62kWh per month – the equivalent of 11 washing machine cycles – and cut their monthly carbon emissions by 4.5kg.
• The effect was even stronger among drivers of electric vehicles (EVs), reducing peak consumption even further, by 47%.
• 95 per cent of consumers paid the same or less than they would on Octopus Energy’s cheapest fixed-price deal.
• The average Agile customer would save £188 per year compared to legacy standard variable tariffs, and £45 per year compared with Octopus Energy’s 12 month fixed tariff.
Greg Jackson, chief executive of Octopus Energy, said: “Empowering citizens to shift their electricity use away from peak times will be critical to avoiding a £40bn bill for upgrading energy infrastructure. As we decarbonise, shifting consumption times will also enable more rapid uptake of electric vehicles and renewable generation.
"Now we’ve demonstrated that the technology works, we welcome the opportunity for more consumer and market-led approaches to get the most out of our grid, rather than traditional command-and control mechanisms."
Energy and clean growth minister Claire Perry said: “Products like the time-of-use tariff explored in this report are giving consumers more information about their energy use, and it’s exciting to see real case studies of people changing their behaviour, and saving energy – and money – as a result.
"Smart meters are the key to unlocking these benefits which is why we are committed to all homes and businesses being offered a smart meter by the end of 2020. They are the key link in the chain, ensuring our cleaner, smarter energy future works for consumers, putting them back in control of their household energy bills, and giving them access to innovative products and tariffs such as those that reward consumers who use energy at off-peak times.”
Have you tried a time-of-use tariff? Contact your energy supplier to find out their latest pricing model, and start saving even more money with your smart meter.
Need more advice on ToU, smart metering, battery storage, or demand-side response solutions? Talk to one of our experts today.