The energy market is complicated. Consumers are understandably confused by the range of tariffs and suppliers – and even by where energy comes from. In 2021, 40 percent of our electricity was generated using gas, around half of which was imported by pipeline from Norway or by ship from places such as Qatar, the United States and Russia.
Smart meters enable the opposite of this opaque system. They offer visibility and transparency that can help consumers make the best decisions for themselves.
With energy prices rising, smart meters are playing a growing role in helping people feel more in control of what they spend on energy, and building resilience in the system. “Smart meters can help customers save money by enabling them to reduce or change their energy usage,” says Anna Moss, senior consultant at Cornwall Insight, which recently partnered with Smart Energy GB to produce a report on smart meters and energy security.
According to research by Smart Energy GB, 36 per cent of people in the UK are more interested in where their energy comes from due to increasing prices. Meanwhile, 45 per cent say they want less reliance on fossil fuels. Importantly, 41 per cent of respondents supported generating more energy in Britain to make our energy system smarter and more sustainable. Government energy policy, too, has shifted towards energy security, with a bigger focus on nuclear and renewables in order to move our supply of power to British sources.
Smart meters are vital in developing a more resilient infrastructure that can respond to geopolitical crises and climate change. On an average day, energy use is moderate from the morning to the early evening – when it peaks. It then drops as we go to sleep. Those peak hours are the costliest and most demanding on our energy system. If we could smooth out the peak and use more energy overnight instead, it would mean more of our energy needs could be met by renewables, rather than fossil fuels. This is because we still rely on fossil fuels to meet periods of high energy demand.
The way we pay for energy is starting to reflect this approach to demand management. This past winter, the Demand Flexibility Service run by National Grid ESO was able to reimburse people for reducing their energy use during peak hours. Initial reports from Octopus Energy, one of the suppliers participating in the trial, showed that some 200,000 households reduced their electricity demand, saving 108MW over a single hour. The average consumer earned £1 on top of their energy savings and the top 5 per cent earned an average of £4.27. National Grid ESO estimates that this scheme could save around 1.5GW during those critical peak hours. To put that into perspective, 1GW can power 100 million LEDs or 300,000 homes.
This means that suppliers can design tariffs and payment systems that encourage and reward choices that are better for the planet and reduce our reliance on imported energy sources. “Time-of-use” tariffs do exactly this, offering different prices at different times of the day, similar to peak and off-peak train tickets. For example, the cost of charging electric cars or devices overnight, or of running dishwashers or washing machines outside of peak hours, could be reduced.
Time-of-use tariffs currently in development will use the data collected by smart meters to provide flexible options for a range of consumers. There are already a range of models for how they could work: tariffs where the peak rate is typically close to, or not much more than, a normal flat tariff rate, and the off-peak rate is lower; tariffs where the peak rate is higher and the off-peak rate is significantly lower; and tariffs that have variable and dynamic rates that match the wholesale market prices more closely.
“If you’re moving [energy use] to a different time and you’re connecting that to a time-of-use tariff, you’ll support reducing that peak demand during the day . But you might also be rewarded for shifting your energy usage around because you’re accessing lower price points,” Moss explains.
This move to time-of-use tariffs also means other technologies can come into play, particularly as more of us swap our petrol cars for electric vehicles. For example, consumers could be rewarded for storing energy in batteries during periods when renewable energy generation is abundantly available. “If we can have things like smart charging and what’s called ‘vehicle to grid charging’, it would give us better control over the times that the vehicles are taking electricity off the grid and potentially their ability to put electricity back onto the grid as well,” says Moss. That energy could then be used later to smooth out demand. It could also help in planning more responsive renewable energy generation, or coordinated energy consumption in a town or neighbourhood.
The government has a vision for how this will work in practice. In its Smart Systems and Flexibility Plan published in 2021, it set out how consumers will be able to access smart tariffs and appliances through the 2020s, with smart technologies becoming the standard by the 2030s.
Smart meters are already a crucial part of our energy system. They give consumers a measure of control in times of uncertainty. They could also be key to creating a new energy-secure and climate-friendly infrastructure that will be more resilient and responsive to consumer needs.
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