Big changes are taking place in the energy sector. Though the Big six energies companies still have the monopoly in the marketplace, the number of smaller independents is growing all the time. A revolution is taking place with the advent of independent energy suppliers, consumers generating their own solar power, dynamic pricing plans and smart homes.
No one can be blamed for being a little confused when confronting the choice of electricity tariffs available on the market today. There are hundreds of different tariffs to choose from so deciding which is the perfect one for you can be difficult. It is helpful that electricity tariffs are now tightly regulated which means that suppliers can’t offer more than four different tariffs to avoid some of the confusion. If you are just interested in price, then price comparison sites could work for you. However, these sites will be less helpful if you want to know how green each supplier is, where each supplier’s energy is coming from or whether their tariff is offering the best value for electric cars and home batteries.
With concern for the environment being a major reason for households to go solar it’s not surprising that they want to buy their non-solar electricity from renewable sources as well. Green electricity tariffs provide assurance that any electricity supplied to you is matched by electricity produced from renewable electricity sources. In order to prove the tariff’s green credentials all renewable generation comes with tracking certificates called REGOs. Most companies also do something additional to this such as investing in renewable generation, tree planting or giving to community energy funds etc. There are various styles of green electricity providers which can be for the most part categorised as:
- Green electricity suppliers that invest in new renewable generation. These companies invest in new wind and solar farms, as well as other related technologies such as electric vehicle charging infrastructure. This group includes companies which are older and more established like Good Energy and Ecotricity.
- Green electricity suppliers that pay into funds. A good example in this group is Marks and Spencer Energy. They pay a contribution per customer into the M&S Community Energy Fund. This fund then provides grants to community energy projects across the country.
- Green electricity supplier that plant trees. Many green electricity suppliers choose to plant trees as a way of providing additional carbon savings, including such companies as Bulb, Octopus Energy, OVO Energy and Green Star Energy.
You tend to find that the more well-established suppliers of green electricity buy electricity from their own wind and solar farms. The newer green electricity suppliers will source renewable power from the cheapest sources they can find. This can work out to be very cheap if the supply includes old hydropower stations which were paid for long ago. This means that you will sometimes find green electricity suppliers such as Bulb providing the cheapest power on the market.
Some suppliers are offering time-of-day tariffs. It’s a simple case of supply and demand as energy usually costs more on wholesale market at peak times. Basically, it costs different amounts to generate electricity at different times of the day. Energy suppliers will tend to pay more to obtain energy during the day which is typically the most expensive time as demand is high. It costs more to produce electricity at peak times between 4pm and 7pm and less in the middle of the night, and at weekends. This is why some energy providers offer time-of-use tariffs that charge lower rates to businesses & homeowners for the electricity they use at off-peak times. You may be familiar with Economy 7 tariffs which have been around for many years and historically encouraged the use of night-time electricity for electric heating. What we are now seeing are specific variants of this, especially for electric car charging.
There are a number of time-of-day tariffs specifically designed to encourage households to shift their demand to off-peak times. These tariffs have low overnight pricing, medium prices in the day and high pricing at peak times between 4 and 7pm.
To give an example, Green Energy UK offer the TIDE tariff which has the following price structure:
- Off Peak time– 7.9p per kWh
- Standard time – 16.3p kWh
- Peak time – 32.5p kWh
In order to access a time-of-day tariff you will need to have a smart meter installed. You will be at a particular advantage if you have a battery storage system. Daytime demand will be largely covered by solar, and the battery will discharge to the home and cover your demand during those expensive peak time hours. This means that a household with a home battery might only be buying electricity at cheaper times regardless of when electricity is actually being used in the home. It is important to bear in mind however that your battery will operate differently throughout the year. You need to be sure that you can capture enough solar during the winter to fill the battery or you may find that you are importing expensive peak time electricity anyway.
You can get round this with a Tesla Powerwall which can partially top up your battery with cheap night-time electricity, whilst still leaving space for tomorrow’s solar generation. This an excellent way of ensuring that the only electricity you use is either your own solar or cheap night-time electricity.
Electricity tariffs can go one step further with real-time pricing meaning that instead of banding pricing by time of day, the price actually varies every half-hour through the year. The market leader with this approach is the Octopus Agile tariff. Once signed up, they will send you the next day’s prices at 4pm, so you can look at these and determine when to use electricity. If national demand is low and there is a lot of renewable generation from for example, offshore wind, then prices may be very low. If the reverse is true and demand is high and renewable generation low, prices will be high such as on winter evenings, when the weather is still.
Interestingly though the Agile tariff is likely to follow a similar profile to the TIDE tariff which means that once again you could avoid high prices by having a home battery (especially with a Tesla Powerwall) and only ever importing electricity at the cheapest times.
The price of each unit of energy on some of these time-of-day tariffs can change throughout a 24-hour period and even on different days of the week.
These tariffs are ideal for businesses if they are able to be flexible with how and when energy is used as it can save them money. It could be worth businesses considering changing their routines so that they could move to off-peak usage for some if not all of their main energy consuming activities.
These businesses would have to be on a time-of-use energy tariff, and either have a half-hourly (HH) meter or a smart meter fitted.
An HH electricity meter sends half-hourly meter readings to your energy supplier. This automated process lets a business owner accurately monitor their energy use and the times their business uses the most energy, helping them to look for ways to use it more efficiently.
Some large businesses are required by law to have an HH meter fitted. If you are a company that regularly uses 100kW of electricity in a half hour period, you will be required to install an HH electricity meter. Businesses that fall into this category include factories, supermarkets, large offices, and warehouses. You can choose to have an HH meter installed if your business uses 70kW or more in a half hour period.
With the arrival of the electric car a number of new electricity tariffs to support electric vehicle charging have come onto the market in recent years offering cheaper night-time rates. This makes it possible for electric vehicle owners to charge and run their cars as cheaply as possible and makes it less attractive to charge at peak times which if high volumes were reached could be problematic for the grid. To see a completely up-to-date list of night-time rates you are advised to check Zapmap’s list of EV tariffs.
Businesses that don’t have an HH meter can have a smart meter installed instead. They send regular meter readings to your energy supplier automatically so you will only be charged for what you use, putting an end to estimated billing.
Smart meters also allow you to monitor your company’s or household’s energy consumption accurately so you can identify when the peak usage times come into play.
All UK businesses and households must have been offered a smart meter by suppliers by the end of 2024 as part of a rollout by the government although this deadline may be delayed as a result of the coronavirus pandemic.
It’s essential that before you commit to a time-of-use tariff you ensure that it’s right for your business or household as you could end up paying more than on your previous tariff.
You can make significant savings if you can use a large proportion of your energy in off peak periods or can change your routines to accommodate this. But if you’re tied to using the bulk of your energy during peak times the time-of-use tariff may actually cost you more than other tariffs.
However, having an HH or smart meter and being incentivised by a time -of-use tariff could motivate you to plan how to use your energy more efficiently. The more you can use energy efficiently the bigger the potential for saving on your bills.
An added bonus to this, is that time-of-use tariffs help to reduce the pressure on the UK energy infrastructure at peak times.
Of course, price isn’t the only concern for customers choosing a tariff and the generation mix received. It’s also becoming more common for tariffs to offer local supply or supply that comes from specific sources.
This is where the future of energy generation can have a part to play in bringing communities together. For example, municipal tariffs such as the not-for-profit Robin Hood Energy or Bristol Energy ensure that their energy supply comes form generation in the local area.
It’s still early days for peer-to peer trading of electricity but the distributed generation and sale of electricity could cut out the need for traditional utilities to act as the middleman in the future.
As you can see there are a multitude of tariffs out there making it important to do your research thoroughly before making your choice. It’s worthwhile talking to your electricity supplier to determine exactly how each tariff will work so you can plan for the change in advance. As with all financial transactions always make sure you compare the different options before you commit to a switch.
