✔ If homes use too much electricity at night, suppliers will raise night prices
✔ Smart meters and controls will save you more money than ever before
✔ UK consumers will save up to £4.5 billion by 2045, according to Ofgem
You and the rest of humanity want to keep warm and use all your electronic devices while also paying lower energy bills – and that soon may be a reality.
The accurate readings given by smart meters have already encouraged people to alter their electricity usage – especially if they’re on a ‘time of use’ tariff, which charges different amounts at different times of the day.
Consumers are now able to save money by shifting more of their electricity usage to the nighttime, when it’s cheaper – but surely everyone will soon take advantage of that fact, creating a new electricity usage peak and potentially overwhelming the grid?
Here’s what electricity suppliers would do in that situation, what Ofgem is already doing to protect against it, and why you have nothing to worry about.
Why are people buying their electricity at night?
People are increasingly choosing to buy as much of their electricity at night as possible because it’s cheaper, thanks to a growing number of suppliers that offer time of use tariffs.
At the moment, these tariffs simply offer a cheaper rate when you use electricity at night.
For instance, one Octopus tariff features a night rate that’s 14p per kWh cheaper than the day rate – a 48% saving.
Energy companies offer this type of rate because it benefits them too, by alleviating pressure on their morning and evening peak times and cutting the overall amount of energy needed to power the network.
19% of British consumers are already on time of use tariffs called Economy 7 and Economy 10, which have simple day and night rates.
Smart meters have made these tariffs more attractive, as they can accurately report your usage instead of estimating it, which ensures you get the maximum savings when you use most of your electricity at night.
These smart meters can already be programmed remotely to switch from a single tariff to a day-and-night tariff – like Economy 7 or 10 – and can take on even more rates if necessary.
Green Energy UK, for example, offers a tariff with five different rates, which mainly benefits consumers with electric vehicles and storage batteries who are able to shift the majority of their electricity usage to the cheapest period.
What will happen when more people buy electricity at night?
If an increasing number of people switch to time of use tariffs that feature cheaper energy at night, then the night will become a more expensive time to use electricity.
This is because suppliers respond to higher demand at a given time by raising the price during that period. In that situation, a new cheap time would rise up to take the night’s place on time of use tariffs.
This way of solving the issue is effective – but it’s also slow. Suppliers would have to spot the trend, then wait until people were forced to get a new contract to switch them away from a cheap nighttime rate.
Energy companies will soon be able to respond in quicker, more interactive ways, creating a whole new paradigm for home energy usage.
What’s the next step?
Thanks to smart meters, time of use tariffs can accurately charge people a different amount depending on when they consume electricity, resulting in savings if you use your devices at unpopular times.
The logical next step is to make these differently priced periods much shorter, and to base them on how much electricity is being channeled into the grid at any one time.
We’re talking 30-minute-long periods, or market-wide half-hourly settlement (MHHS), to use Ofgem’s phrase.
This plan, which was rubber-stamped in April 2021 and is due to be completed in October 2025, is set to revolutionise domestic energy consumption across the country.
It will incentivise suppliers to use the spread of smart meters to create tariffs that reflect consumers’ energy usage and motivate them to use electricity when it’s cheaper, according to Ofgem.
The energy regulator has said the MHHS will also increase competition in the energy sector, predicting that newly created companies will move quickly to offer better deals to customers.
This would also be a positive move, considering that dozens of suppliers have gone bust since the start of the gas price crisis.
Ofgem has forecast that by 2045, this new way of buying electricity will have saved British consumers between £1.6 and £4.5 billion.
The wider benefits of this move will also save the country as much as £3 billion, according to Ofgem.
The future will see even smarter charging
Instead of companies offering new tariffs based on customers shifting their electricity usage from day to night, they will offer constantly changing tariffs, based on the actual price of electricity in these half-hour periods.
This sounds stressful for customers – but fortunately, you’ll have help to find and take advantage of the cheapest times to use electricity.
Smart controls will keep track of prices as they change, and automatically charge devices when it’s cheapest. If it’s convenient for you, they’ll even be able to run items like your dishwasher and washing machine at cheaper times.
And if you have a storage battery, you could set it to only charge itself with cheap energy, then use it to power other items – such as your lights and TV – when electricity is more expensive.
You may not even need to buy a battery to achieve this. Vehicle-to-grid charging will soon allow you to treat your electric car as a giant battery, potentially saving you £725 per year.
Overall, the move will ensure that you’re paying the lowest possible amount for the energy you use.
And it’s not science fiction, either. Many electric vehicle owners are already able to profit from this capability.
Smarter controls will help the climate
Ofgem’s impact assessment of its plan found it will lead to “faster decarbonisation,” and smart controls can make this a reality.
Smart controls flatten peaks. They identify the cheapest time to use electricity, and by using it, make that time gradually more expensive, until it’s not the cheapest anymore.
So in a system where the level of energy production is completely constant, electricity would cost the same amount the entire time, as every peak is quickly flattened by smart controls.
However, that isn’t the world we live in. Electricity enters the grid in different quantities at different times.
This is particularly true of renewable energy, which enjoys large peaks and troughs due to the wind’s variable nature, and the sun’s insistence on only shining during the daytime.
In the not-too-distant future, this sudden surplus of green energy on the grid will drive down the half-hourly price of electricity, alerting smart controls to a big saving.
The price during that time could even go below zero, as it has in the UK during incidents such as Storm Dennis in 2020 – meaning consumers were paid to use electricity.
Smart controls will direct your electrical devices to consume all the power they need during that period, until either your home’s items are fully charged or the supply falls and causes the price to rise back up.
That means we could use every kilowatt of eco-friendly electricity, with nothing wasted – making green energy even greener.
A cheaper, more environmentally conscious future awaits. All you have to do is get a free smart meter, and wait.
Are there any problems with this future?
You can currently get a smart meter installed for free, but to fully optimise your electricity usage on a time of use tariff, you’ll need smart controls.
Of course, the people who need these controls most are those who can’t afford them.
There were also fears that millions of households buying their electricity at night would result in a third daily spike, in addition to the 8am-10am morning peak and 6pm-9pm evening peak.
The idea that the National Grid would have to deal with three sudden spikes in power usage per day is worrisome, but thankfully fixable.
Smart meters will stop a third peak from happening, and once smart controls are widely owned, all peaks will be reduced, except ones that result from unexpected spikes in the energy supply – and those are the peaks you want.
