Utility Week

12 | APRIL 2023 | UTILITY WEEK Electricity Analysis How smart are Britain's energy tariffs? Suppliers face numerous challenges in unleashing the full potential of smart tariffs, including of outdated systems and markets that fail to properly reward households for their flexibility. I n the homes of the future, people will no longer be passive consumers of electric- ity, simply taking power from the grid as and when they need it. Instead, whether consciously or not, they will be active par- ticipants in a smarter, more decentralised energy system, importing and exporting electricity based on price signals reflecting renewable output and available grid capacity at the time. This vision has been talked about in the energy industry for many years. Indeed, the rollout of smart meters, one of the keys to unlocking it, has already been going for more than a decade. As well as bringing an end to the archaic system of guesstima- tion that has long underpinned settlement and billing, smart meters enable suppliers to track people's consumption in each half- hour settlement period and offer them smart tariffs that incorporate the aforementioned price signals. The rollout has been plagued by prob- lems – suppliers now have until 2025 to offer all households a smart meter, five years later than originally planned. Nevertheless, according to the latest government statis- tics, of the 28.8 million domestic electricity meters in Great Britain at the end of Septem- ber, roughly half – 14.4 million – were smart meters operating in smart mode. In theory, at least, there is already a large potential market for smart tariffs. Most large suppliers do now offer some form of smart tariff, but most are also relatively simple in nature, essentially modern versions of the old Economy 7 tariffs, offering cheaper over- night electricity and usually with electric vehicle (EV) charging in mind. There is still a long way to go until their full potential is unleashed. Time-of-use vs type-of-use Summarising the current state of the market, Dylan Johnson from the Future Energy Asso- ciates says their database of energy tariffs shows "smart tariffs have become increas- ingly prevalent in the UK retail energy mar- ket, with many suppliers offering options tailored to specific needs". "This variety of smart tariffs includes tar- iffs designed for households with EVs, with heat pumps, those with the ability to sell electricity back to the grid or just households that want to take advantage of fluctuating electricity prices and shi˜ energy consump- tion to cheaper periods," he says. Yet Johnson says the opportunities pre- sented by the now substantial number of smart meter customers is still "largely untapped, with most suppliers having lim- ited offers. We think there is much more potential for innovative tariffs that cater to different consumption profiles and give greater flexibility and control for customers". Arguably, the company that has been pushing boundaries the furthest is Octopus Energy, for example, with its Agile Octo- pus tariff. Introduced in 2018, this was and remains the only time-of-use tariff on the market that provides customers with half- hourly prices indexed to those on the whole- sale market. The tariff has been well received by early adopters and energy technology geeks, who can sometimes be found on social media dis- cussing price trends and one-upping each other with their bill savings. Despite their potential exposure to high power prices over the past year, Octopus head of flexibility Alex Schoch says the num- ber of customers on the tariff has remained relatively stable: "Agile continues to be a tariff where customers who want to be very engaged with their electricity usage and how they use it can get substantial benefit from it. But it requires you to either have a set-up where you've automated or timed a lot of your big loads, or you're super engaged. "We know smart tariffs are continuing to be an incredible draw to consumers but dif- ferent offerings are suited for different types of customers." In terms of customers, though, Octo- pus has recently been having more success with its Intelligent Octopus EV tariff, which has seen consistent 30% month-on-month growth over the past year. At first glance, Intelligent Octopus may appear to be just a modernised Economy 7 tariff – the supplier also has one of these called Octopus Go – but like a swan swim- ming on a lake, the real action is going on beneath the surface. To access this lower rate, customers must put Octopus in control of timing, subject to their requirements of what charge level they need by when. The company recently revealed that it is now managing over 100MW of charging capacity through the tariff – more than the largest battery facility on the power grid. "Our Agile Octopus tariff appeals to a certain type of consumer but not as much as Intelligent Octopus appeals to consum- ers, and I think that's because if you look at the way these different tariffs are designed – some have more clearly defined price peri- ods and others are more dynamic," notes Schoch. "In a world where you see constantly in the news incredibly high wholesale prices, that can be a bit of a detraction from custom- ers wanting to be on a tariff that is directly indexed to the wholesale market." He continues: "As you get more and more comfortable with managing your electric- ity use, then different smart tariffs appeal to you. Some people are willing to take more risk and be more actively engaged day to day versus others who like that price certainty." "There's no one smart tariff to rule them all," he says. Kieron Stopforth, origination manager at Octopus, is less ambiguous in his belief that tariffs like Intelligent Octopus have more mass market appeal: "What a tariff is if you think about it in fundamental terms is a kind of hedge against the price volatility of need- ing to buy power every half-hour… "There will always probably be a part of the base that does want the time-of-use tar-

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