Small energy provider Green Energy UK has launched a new tariff, purporting to be the first of its kind, offering households electricity at different prices based on the time of day at which it is consumed.
The idea is similar to the existing Economy 7 and Economy 10 tariffs, which offer energy at two different prices during peak and off-peak times of use respectively. This new tariff, however, takes the idea one step further.
Economy 7 tariffs work by using two separate analogy meters, one of which runs during the day, when electricity is more expensive than normal, and one than runs from midnight to 7am, when electricity is cheaper. Economy 10 tariffs work in much the same way.
The new tariff from Green Energy UK, called TIDE, works by using a smart meter, which the supplier offer to install for free for anyone who signs up to the tariff. Pricing will be offered at multiple levels throughout the day ranging from 4.99p per KwH overnight on weekdays (11pm-6am), up to 24.99p per KwH at peak time during weekday afternoons (4pm-7pm).
The idea of time-of-use tariffs, that have been made much more viable now that smart meters are available, is being presented as one that can help both consumers and providers alike.
Green Energy UK’s CEO Doug Stewart cited the recent closure of GB Energy Supply – a small provider who had to cease trading after their consistent low-price approach ended up being at odds with wholesale costs and became unsustainable.
“If we are to learn anything from GB Energy’s failure,” he said, “it’s that the cheapest tariffs are unprofitable and unsustainable. The mantra of ‘switch to the lowest tariff’ has done nothing for energy efficiency and encourages higher use by those who can’t necessarily afford it.”
Time-of-use tariffs allow customers to make use of cheaper electricity overnight to, say, charge up their electric cars (if they have them) or other devices, or to use washing machines. But they also prevent energy suppliers from losing out during the day, when energy costs more.
Because of the higher price during peak hours, as well as the relatively high cost of gas on the TIDE tariff (3.59p per unit), it won’t be for everyone. But for some, it will work perfectly.
Money Saving Expert founder Martin Lewis said: “This is an interesting new tariff that should be welcomed. It is not the first tariff to have different prices at different times but it is the first to take advantage of smart meter technology. However, it’s important to mention that it’s not cheap for gas and you have to be on a dual-fuel tariff to get it.
“But those who are mid to high users, who use a lot more electricity than gas, are capable of skewing their energy use overnight, and are out from 4pm to 7pm, can see decent savings here.”
Similarly, Citizens Advice CEO Gillian Guy explained that people should carefully consider whether or not they could benefit from time-of-use tariffs before signing up for one.
She said: “Time-of-use tariffs can be a good deal for those who can be flexible about when they use electricity at home. Some people will be able to make changes in order to save money, such as cooking or washing clothes at off-peak times.
“But for others – for example, families with young children – it could be more difficult to change when they use electricity.”
While time of use tariffs will not necessarily be for everyone, what they (and the rollout of smart meters more generally) represent is a shift towards a more tailored and responsive energy supply system nationwide.
Money Expert CMO James Wittams-Smith explained: “The ultimate aim is to have smart homes powered by a responsive, de-centralised smart grid, allowing for electricity supply and consumption to be directly linked based on real-time usage data. This makes for a much more efficient, and cost-effective system overall”.