Variable tariffs based on when you use your energy have long been suggested as a means of helping to manage demand, while also offering a potential means to save money on bills. Now, they have arrived as an option for householders. They work with standard smart meters and have the potential to offer far more flexibility than traditional variable price tariffs.
Green Energy UK's TIDE tariff means that for those using electricity between 11pm and 6am would pay around a third of the average UK unit price, but up to five times as much for electricity consumption at peak times.
It's an exciting move from one of the market's smaller players – but it's important to note that this is not the kind of tariff that would work for everyone – or indeed save everyone money.
If you’re more restricted and can’t avoid peak times (e.g. family with young children) you’d probably see a rise in bills, so if your energy costs are sky high, shopping around for a better – albeit more standard – deal would be a better option. But if you can shift your energy use to off-peak times, you could make big savings this way.
Examples of people who could benefit from Time of Use (TOU) tariffs include those who are at home during the day, such as retirees, home workers, and parents with pre-school children. These groups will find it easier to shift their cooking, cleaning and other heavy electricity consumption away from the evenings to avoid peak times.
If these type of householders don't sound like you, another possible option to save with TOU is if you’re able to set timers on certain appliances to come on overnight, when the energy is cheapest, such as your washing machine or dishwasher.
Green Energy UK's CEO Doug Stewart has spoken out before to highlight what he sees is the fallacy of new market entrants constantly striving to be the cheapest. Hence, then, this more personal and tailored vision of energy use.
Aside from giving the opportunity to save cash in the right circumstances, the tariffs are also a positive from an energy security and environmental perspective, as it reduces peak load on the grid, meaning you can reduce power plant capacity.
There have been some large-scale pilots of TOU tariffs in Ireland in 2009/10, which showed that when customers were given a TOU tariff and additional information, they used 2.5 per cent less electricity overall, and 8.8 per cent less at peak times. On the back of this trial, TOU tariffs were mandated in Ireland alongside the roll out of smart meters.
Smart metering, and the more precise and visual representation of home energy use this offers, is likely to come hand-in-hand with further tariffs of this kind.
But what is clear is that if TOU is going to become more of a mainstream approach to energy consumption and billing in the UK, information counts for a lot. Good quality guidance needs to be in place for consumers on what it might mean for them, and whether it really is the best way for households to manage their energy use.
The offer of more ways by which energy consumers can select tariffs appropriate to their lifestyle – and help manage grid demand to boot – is a positive move. It's something worth getting right.