Dynamic pricing offers ‘carrot and stick’ to help make electricity supply greener

A new trial will see millions of British households offered special ‘dynamic pricing’ electricity tariffs which will offer incentives to use power when the demand is low or the supply is ‘green’, while charging more at peak times. 

The plans are supported by three of the biggest energy suppliers in the UK: Scottish Power, EDF and Octopus Energy, and will use smart meters to monitor the time and amount of energy used. 

The move would mean that power used in peak periods would be more expensive in order to discourage non-essential use – in just the same way as train and plane fares are pricier at peak times. However, the rate would go down at times when demand on the grid is lower. This is perfect for electric car owners, who usually charge overnight. 

In an email to customers, Octopus Energy said: “When the grid is struggling, dirty coal and diesel stations are fired up to satisfy the UK’s energy needs. Using the power of smart meters, we can demonstrate the massive potential of UK homes to collectively shift their energy usage, and prove those polluting options aren’t needed. 

“We’re working with National Grid ESO, the people who run the electricity network, to trial a big national ‘turndown’, where households come together to consciously use less energy at certain times – and get rewarded with free power for their efforts. While your own home might only be a small drop in the ocean, every ocean is made up of many drops; so put enough of them together and they soon add up.” 

From next week, Octopus Energy customers with a smart meter will be given the opportunity to take part in the trial. They will get the chance to earn money by cutting their power use by between 40% and 60% of their normal levels during peak times. Every day demand for electricity goes up between 9am and 11am, then again between 4:30pm and 6:30pm. 

If successful, this scheme could be rolled out to all households, incentivising us to not only consider how much energy we use, but when we use it. Electric vehicles could charge up in off-peak periods when there is a lot of energy being generated by renewable sources and then be sell it back to the National Grid when needed during peak times if their owners haven’t used it.

Differential pricing will encourage charging at night