A debate on marginal pricing and incentives to move energy usage to weekday off peak times

First of all a thank you to @Tim_OVO  for taking my meanderings on Marginal Pricing and making an appropriate thread for it. Warning: more, long-winded meanderings ahead but with the promise that it will give you a chance you think what opportunities could lie ahead in the future.

From the (squeaky energy) link I gave above I think it is very obvious that the pricing system for electricity in the UK is incredibly complex. Not only involving the introduction of intermittent, large-scale green energy generation but also trying to fit that into traditional financial instruments used to match supply to demand and also incorporate investment. I think there are a lot of people tearing their hair out trying to manage this, however, this does generate new possibilities and opportunities because it is obvious there are times when energy will be plentiful and cheap and other times when it won’t. Take an old saying ‘Make hay when the sun shines’ and turn it into ‘Make steel when the wind blows.’

The Demand Side market can be based on either constant cost (Retail) or variable cost (Wholesale). Retail is where you have a constant cost per unit 24/7 all year round. The job of the energy supplier is to calculate a tariff where they can make a profit at low cost times to balance out the losses during the peak and still stay in business. Wholesale is where you buy electricity by the half hour (HH) at a variable price which some people know as ‘Agile’. If you can forego using power during the peak then you can pick up very cheap or even negatively priced electricity at other times. There are some customers who have a relatively low usage and want the comfort of a constant price and where wholesale prices wouldn’t suit them anyway or would be risky. There are other customers who understand how to calculate their total cost for the year (an HH Convolution**) based on variable pricing and can be flexible with their usage and also understand and can mitigate the risks.

I think the opportunity exists for utilities to offer a range of products from Full Retail to Full Wholesale to suit different customers. At the moment you have to shop around different utilities to find the one that matches your needs but what if this was available within one company? There has been a radical departure from traditional energy generation as recent as 2012 when nearly 50% of our power generation was coal. I think the utilities have to make a similar move or get left behind. Where their expertise comes in is that they can easily calculate a customer HH Convolution using historic pricing and their individual usage and suggest a product that best meets their needs in terms of cost and risk. The benefit for the utility is that the more customers that take up wholesale prices then the lower risk they have in return and can offer a lower price. Perhaps Ofgem would prohibit this to start with for some reason but they, in turn, have to evolve their restrictions where they prevent a customer from getting a balanced cost/risk with their utility. I think we have an incredibly interesting future for power supply and usage in this country and I don’t think it can be denied by anyone that flexibility is the going to be a key word in the future.

A personal take on this

Since this discussion kicked off a while ago about people who were saying they were finding it difficult to meet the requirements of Power Move, I offered some advice, as did others and I hope it proved to be useful to some. I then realised that Power Move was actually a zero risk, first step into the Wholesale Market. Having realised that I did an HH Convolution (easy for me) with my historic usage against an ‘Agile’ product and found that my in-house electricity cost came out at about the same but I could approximately halve my £800 bill to charge my car for the year (10,000 miles). You could say, why don’t I use the Charge Anytime add-on but neither my car nor charge point are compatible and I won’t be changing either in the near future. What is more, I don’t even need to change anything; the way I use electricity in-house (my partner will be pleased with that) or the way I charge the car except I’ve noticed there is a trend (as a by-product of the HH Convolution) for when to best start charging the car at night depending on the month.

If you got to this point I congratulate you on your stamina (or perhaps you ran out of other things to read over Christmas) and I hope it has given you some thoughts on how things could change and perhaps at some point in the future the ultimate lowest cost supply can be secured with a personalised plan from your energy supplier tailored to your specific needs. Two things are happening for certain. We will have to be more flexible with our power usage with increasing intermittent generation capacity and if utilities want to retain customers then this flexibility has to come with access to lower priced, green energy.

Wishing you a Happy 2024

Peter

 ** An HH Convolution – There are 17,500 ish half hour periods in a year. A convolution is multiplying two sets of numbers together so, for each of the ~17,500 HH periods, you multiply the power used by the price for that half hour and add them all together for the total cost for the year. Easy for those with the usage and pricing data and a spreadsheet. Impossible otherwise.

@Peter E

A few 3rd parties attempted to develop tools to take all the 30min data they could get from a customers smart meters to attempt to work out the best tariff across the whole market, but a lack of tariff after the Ukraine conflict I suspect stalled the effort.

For example Bright/Glowmarkt

https://smarttariffsmartcomparison.org/home

In theory the faster switching service would make this sort of tool great.

Although things like OVO Anytime would be messy for 3rd parties as the smart meter doesn't store the EV charge saving.

Every month on the billing emails from ovo, customers are told what the best tariff is for them, although I assume this isn't clever enough to look at tariff like OVO Anytime.

Putting things into - also historical - perspective, this page has a wealth of pertinent data: Energy (spectator.co.uk). Worth taking a peek now and then.

One issue I have is compatibility. We have existing solar under the 2015 FiT scheme, and batteries bought 18 months ago.

Suppliers want you to fit their panels, batteries and control system to be able to use them with their TOU tariffs. 

Same with electric cars - early owners find their cars or chargers are not compatible with the best TOU tariffs. 

I quite like the ‘make do and mend feel’ and have enjoyed hunkering down with a good book and flask, and watch programmes on my pre charged laptop. We have it down to a fine art of boiling the kettle to fill a litre flask with hot water and use our high powered battery operated torch in the kitchen as our spotlights are power hungry. I don’t find it tedious or depressing but rather it reminds me of my childhood and is quite comforting.

Anyone looking should just remember that UK territorial energy use has been "offshored" and makes us look better than we ought. We've shut much of our heavy use industry (ship building, steel making, plastic moulding and much more) and now buy in finished goods. The energy use is counted in the manufacturer's country and in shipping. 

Ben Dhesi, developer of the Hugo app, hints at some interesting plans in the near future for integrating households’ consumption, tariffs, generating/storage/EV resources, etc. all in one app.  His Hugo website,  https://hugoenergyapp.co.uk    even apart from the app itself, I find worth exploring, especially taking on board the interesting comments above from @Peter E and others re marginal pricing. And all the very best and warmest to all on here for the New Year…

I've seen various apps and web sites like that which @waltyboy mentions, all offering incentives for measuring and getting paid for reducing power use when the National Grid has an event.

They aren't doing it out of altruism; they're getting paid and from the sheer number of them, probably handsomely. It feels an expensive way of achieving reductions in usage, and open to fraud. The monitoring to prevent people signing up for more than one must itself be a complex and expensive process. 

It feels like there are too many, that they divide and hence reduce the benefit to the energy companies such as OVO, and also reduce their abilities to monitor the effect of offering things like the different power move events. 

Or is it just better for the National grid to have as many as possible ways of encouragement to maximise the overall effect? 

For those multi-channel offers, they are all registered with the UK National Grid and so with meter serial numbers being part of the registration, it is quite easy to remove duplicates (all scheme providers have to record and register participants).

In fact if any user is signed up to more than one, both become invalid. 

Ah ! Thanks @BPLightlog That would explain why I eventually failed in my attempt last winter. I signed up to Loop and got a few quid’s worth of Amazon vouchers (which I was able to pass on to charity at the end of the scene), then I joined the OVO scheme which I thought would overwrite the Loop membership. It did for one or two events then it all stopped working.