Wadebridge in Cornwall is the centre of the first UK pilot of daytime cheap prices for electricity. This summer, 240 households will be paying a tariff of 5p a kilowatt hour during the 10am to 4pm period. Outside that time slot, the rate rises to 18p, almost four times as much. In winter, the price reverts to 13.4p across the full 24 hours.
This scheme is offered by innovative electricity retailer Tempus with the participation of the very effective Wadebridge community renewables group. The rapid increase in the generation of solar and wind electricity around the world is driving many similar ‘time of use’ tariffs in places such as Hawaii and California. Mostly these are compulsory, not a voluntary decision as in Wadebridge. In Cornwall specifically the electricity network is struggling because of the strict limits placed by the distribution grid on solar power exports to the rest of the UK and time dependent pricing is a highly important innovation.
Oahu, the most populated of the Hawaiian islands, has a peak late afternoon price about three times the price at midday. New rates such as these often reflect increasing surpluses of power in peak sunshine, which is not well aligned to the maximum need for air conditioning around 5pm, after the sun has begun to fall. In Ontario, peak prices are about twice off peak tariffs. California has now mandated time of use tariffs, likely to be about 15 cents a kilowatt hour for off peak and 37 cents for peak early evening times.
The aim of these time of use pricing schemes is to push electricity consumption into the periods of low tariffs and to minimise the amount used at times when supply isn’t bolstered by sun or wind. As solar grows from its current 2% share of world electricity supply, we can expect more and more use of pricing variations to mould power demand to align better with power production.
Time of use pricing has the vital secondary role of encouraging the purchase of domestic battery systems that take in power at cheap rates and provide it when the household needs it later in the day. As batteries become cheaper, we’ll increasing numbers of people use them to enable the purchase of cheap solar or wind electricity.
Do the new Wadebridge prices make sense from a householder’s point of view without a battery? Not unless the home can shift a reasonable amount of its consumption into the six hour low rate time slot. With average domestic UK electricity usage patterns, the cost of the Wadebridge tariff would be about 109 pence per day during the summer, compared to 104 pence on the standard Tempus tariff. (Unusually, the Tempus ratecard has no fixed daily charge so although its standard tariff looks expensive at 13.4p per kilowatt hour, it is broadly comparable to the Cornish prices of the big electricity retailers, which might include a 25p daily fee).
The Wadebridge summer tariff will save a customer money if the household switches about one tenth of its total consumption into the off peak period. That would probably be achieved by only running the dishwasher, iron and washing machine in the cheap rate period, something not easy for working families but perfectly possible for people at home all day.
In the future, of course, all the appliances in the home will be controllable from a phone app, meaning that machines could be turned on and off as electricity prices changed. Or all of main appliances could use switches that turn them on and off automatically as electricity availability changes. The French electronic controls giant Schneider is partnering California demand response company OhmConnect to do this. The promise is that households will get paid cash for allowing instant switch on and off.
The OhmConnect proposition isn’t exactly a time of use tariff. It isn’t aimed at systematically shifting demand from one time of the day to another. Instead it is a way of instantly cutting electricity use at times of grid stress, such as when a power station ceases to operate without warning.
One trial in London that raised prices to almost four times average levels for one hour periods of grid emergency (with notification by text message) in return for lower prices at other times enabled most participants to save money. More generally, it will only be politically possible to introduce demand moulding price structures for electricity if most consumers and businesses benefit financially. This should be perfectly possible simply because matching supply and demand will also save the utility companies money and stop needless investment in new generating stations that might work less than a hundred hours a year.
However a UK tariff that cut prices when the sun was shining or wind blowing is not yet likely to make a home battery financially logical, even if the ratecard operated all year, not just in summer as it does in Wadebridge. If the householder bought a 8 kilowatt hour battery, and used it to store electricity bought at 5p a kilowatt hour so as to avoid paying 13.p a kilowatt hour, the value might be almost £250 a year. The cost of the best battery and home control system is likely to be over £10,000 at the moment, bought from market leader Sonnen, a German company rapidly developing into Hawaii and California. That’s a forty year payback on a battery that will last about ten. But battery prices are going to continue falling rapidly for the next few decades. Home battery systems will make financial sense soon.