September 2013

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Have you ever thought about how when you use electricity might impact those people delivering it to you?

How about some other questions: do you remember waiting until after 6pm to make off-peak phonecalls?  How about paying for a cinema ticket in the day and being pleasantly surprised at the cost? The concept of ‘peak’ and ‘off peak’ governs so many of our goods and services.  Transport being the most obvious.  Commuters up and down the country are fully aware of the impact of travelling at peak times on their wallets, let alone their stress levels.  Moving away from prices that change throughout the day, seasonal ‘peak’ and ‘off peak’ is a well-known concept in the tourist industry, with low season prices for hotels and even flights.

There are many reasons why these pricing structures exist.  It may be a simple case of supply and demand.  It may be that low prices are implemented to encourage any clawback on expenditure such as staff and lighting when the demand is low.  It may be that providing a service at certain times of day simply costs more to those providing it – i.e more trains are required in the peak periods than the off peak.

But where does electricity sit in this concept?  Electricity costs more for the grid to provide at certain times of day.  In peak times, different power plants are used that may be less efficient or burn dirtier fuel and this means more money.  But domestic customers don’t see this reflected in their bills unless they are on a certain tariff like Economy 7.  This is different in the non-domestic sector.  Large companies are charged more at certain times of day – there are three different bands; red, amber and green.  This reflects how difficult it is, and how much it costs, to deliver electricity to their premises across the day.

So why isn’t this the case in houses up and down the country?  Why aren’t customers made to realise that boiling the kettle 10 minutes later might be cheaper and more environmentally friendly than right now.  Well, it’s partly due to the technology.  Larger customers have meters which measure data much more frequently than we do in the home – so it’s easier to determine when electricity is used.  But the new smart meter roll out means that by 2020 this should change.

In that case, it might not be long before we begin to engage with the costs of electricity on a time dependent basis.  ‘Time of Use’ (ToU) tariffs are an active area of academic research currently and while there have been problems with examples such as Economy 7 from a user perspective, if implemented correctly they could have a key role to play in integrating renewable energy into our grid system and reducing peak demand.   We might not all put on the kettle after the wedding in Eastenders or the penalty shoot out in the World Cup.  And we might think about when we put the washing on or cook the tea based on the price of electricity, just like we think of meeting our friends on the first off-peak train and try to avoid trips in the school holidays wherever humanly possible!