Metering & Managing Energy in a Low Carbon Economy

New time-of-use tariffs could be introduced in the United Kingdom from 2014 as 26 million homes are fitted with smart meters at a cost of £340 per household, paid for partly in higher bills. Featuring electronic displays, the meters will provide minute-by-minute information about energy consumption as well as heralding more accurate billing. A wide-ranging UK Committee on Climate Change report set out how Britain would need to develop a low-carbon economy by 2030 in order to meet targets on greenhouse gas emissions.

By Alastair Jamieson in UK Daily Telegraph (12 December 2010):

The UK Committee on Climate Change (CCC), a panel of experts set up by the Climate Change Act, says charging more for electricity at busy times would cut demand on the national grid and help meet Britain’s carbon reduction targets.

Some households could save money, for example by using their dishwasher at night when prices are lower.

But consumer groups have warned that working families, and others who cannot change when they use their appliances, could lose out by paying only the higher rates.

New time-of-use tariffs could be introduced from 2014 as 26 million homes are fitted with smart meters at a cost of £340 per household, paid for partly in higher bills. Featuring electronic displays, the meters will give consumers and utility firms minute-by-minute information about energy consumption as well as heralding more accurate billing.

A wide-ranging CCC report last week set out how Britain would need to develop a low-carbon economy by 2030 in order to meet targets on greenhouse gas emissions.

It said a more energy-efficient grid would be achieved if Britain’s smart meters were also used to vary prices, charging higher rates at peak times in order to curb usage.

Demand is highest on weekdays between 5pm and 7pm and lowest during the night.

The CCC’s Fourth Carbon Budget also says time-of-use pricing would make electric cars more affordable as they could be recharged from the mains during cheaper off-peak periods.

Households could lower bills further by agreeing to partial blackouts. Smart meters will allow utility firms to remotely switch off appliances such as water heaters or freezers for short periods in order to manage demand.

“Having your fridge off for half an hour would not affect the contents and it would allow better use of energy at times when there is high demand,” said David Kennedy, chief executive of the CCC. “This is already quite common with fridges and air conditioning in places like Florida.”

The report calls on the Government to cut greenhouse gas emissions by 60 per cent by 2030 with a package of measures including more than 12 million electric cars and vans, 25 renewable energy power stations and buses that run on hydrogen.

It said smart meters “together with time of day pricing would allow charging of electrical vehicle batteries when there is spare capacity in the system”. It adds they would allow “remote or automated control of energy usage by suppliers and consumers.”

Although time-of-use pricing has been widely anticipated in the energy industry, its inclusion in the CCC carbon budget means ministers will now decide whether it should become the norm for millions British households.

Ministers will decide early next year whether to implement the report’s recommendations, but the Department for Energy and Climate Change (DECC) has already specified that smart meters should have the technological capability to allow time-of-use pricing.

Charles Hendry MP Minister of State for Energy, last week signalled the final smart meter would be installed earlier than the original 2020 target.

British Gas says it hopes to offer time of day pricing as soon as technology allows but this is “not imminent”.

Darren Braham, chief financial officer at First Utility, a smaller supplier that has pioneered the use of smart meters, said it was already trialling a three-price tariff and plans to offer hourly pricing “but not until about 2013 or probably 2014″.

He said: “Existing night-time tariffs such as Economy 7 aren’t enough to change consumer behaviour”.

The Coalition has pledged to be the “greenest government ever” and will this week announce a consultation on further incentives for low-carbon energy such as nuclear or renewable power plants.

More than one in five households would adopt time-of-use pricing, according to DECC estimates. It predicts average bills across all homes falling by an estimated three per cent as suppliers pass on nationwide efficiency savings, but admits some users may end up paying more.

David Hunter, an analyst at M&C Energy Group, said: “There will always be a rump of consumers who want to stay on a flat rate and they are likely to find themselves paying more to do so.”

Zoe McLeod, energy expert at Consumer Focus, said: “Suppliers say time-of-use tariffs will mean consumers benefit from cheap off-peak energy. However, we are worried that people whose circumstances mean they cannot change when they use energy, for example working families, may end up losing out.

“Energy pricing is confusing enough and new time-of-use tariffs could make it even harder for people to understand their bill. We would like to see a guarantee that nobody will end up paying more than if they had stayed on their original tariff.”

More than one in 10 households already get night-time discounts such as ‘Economy 7′ but they need a special meter that switches between only two different rates whereas smart meters could vary prices by the hour.

Dr Sarah Darby, of the Environmental Change Institute at Oxford University, said: “For too long we have been looking at the supply side to solve our energy problems rather than making changes to the demand side.

“By implementing these measures we can reach carbon targets without having to generate as much power.”

Ahmad Faruqui, principal at San Francisco-based consultants Brattle Group, said: “At the moment in Britain most people pay a flat rate but that will need to change in order to provide a real incentive to use energy at different times. There won’t be much benefit overall unless it hurts a bit for some.

“Fairness is in the eye of the beholder. Some people who don’t want to change will complaint that they end up paying more, but at the moment those people are being subsidised by those who use less energy or at times of low demand.”

He added: “Dynamic pricing will come to Britain eventually. I wouldn’t say it is inevitable because the liberalised energy market in the UK means suppliers would be the ones charging the new tariffs and could face a backlash so there would need to be a long period of consumer education.”

Source: www.telegraph.co.uk