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June 2024 -
Written by Jo Alsop
We’ve demystified smart tariffs for the first time

We reveal the benefits of smart tariffs, find the best tariff for you and help you calculate your savings.

How we buy our electricity is changing for the better and can deliver big energy bill savings. Instead of paying a single price for all electricity, energy suppliers are incentivising households to move their energy use to off-peak times and combining smart tariffs with renewable technologies can cut energy bills by 50% or more.

In this article:

  1. Smart tariffs explained
  2. Why are smart tariffs important?
  3. Smart tariff options
  4. How much can I save?

1. Smart tariffs explained

Most energy providers offer ‘fixed’ tariffs, where households pay the same flat rate for all the electricity they use, currently 24p per kWh.

An increasing number of energy providers are offering ‘variable’ tariffs (aka flexible tariffs) where they offer two or three different prices at different times of the day.

An example of a variable tariff is: a reduced tariff at off-peak times (eg paying 15p per kWh between 4am-7am and 2pm-4pm), perhaps a higher tariff at peak times (eg 35p per kWh between 5pm-7pm) and the standard rate tariff the rest of time.

Variable tariffs are also referred to as ‘smart tariffs’ and the less catchy ‘time of use’ tariff. The ‘smart’ part comes from the need to have a smart meter fitted to access these types of energy tariff. The ‘time of use’ label stems from the differences in cost of electricity per unit (kWh) at differing times of the day and night.

Variable tariffs are nothing new. Economy 7, now largely replaced by Economy 10, has offered off-peak tariffs for many years. However there are some key differences to bear in mind between Economy 10 and the modern variable tariffs:

  1. Economy 10 customers need a dual electricity meter making it hard to switch to other tariffs, where as modern variable tariffs work off a smart meter
  2. Most modern variable tariffs are currently aimed at households with either solar panels, a heat pump or an EV (electric vehicle).

2. Why are smart tariffs important?

Households and industry must stop burning fossil fuels (gas and oil) to meet the UK’s climate change targets. For households this means moving to electric powered heating and cars and for the electricity grid to stop using fossil fuels to create electricity.

To achieve this we need to increase the size of the grid as well as convert it to renewable sources, such as wind and solar. Moving more electricity demand to off-peak times reduces the need to build ever more infrastructure and takes advantage of renewable electricity generation which is cheaper to generate but less ‘on-demand’.

But changing our behaviour is inconvenient! We want to put the washing on when we choose and not programme it for 5am. Time of use tariffs are a way to entice consumers to change their behaviour with the reward of lower fuel bills. As our appliances become ‘smarter’ these things become automated and easier.

3. Smart tariff options* [smart tariffs are updated monthly]

Smart tariffs are a fast moving landscape! 12 months ago only Octopus offered any sort of flexible tariff, but many more providers have since introduced similar products. A bit like mobile phone bundles however, it's quite difficult to compare products on a like for like basis and nearly all require you to have solar, a heat pump or an EV. We take you through the providers with products in the market today.

If you have a heat pump…

Three energy providers currently offer a smart tariff especially for heat pump owners, all with slightly different structures and requirements. We provide the headlines below, but check with the provider for your local price.

NB. Prices rounded to the nearest pence.

  1. The Octopus Cosy tariff has been around for over a year offering two periods of low rates (4am-7am and 1pm-4pm) and one period of a higher rate (4pm-7pm). The low rates are 50% cheaper than the standard rate and the high rate is 45% more expensive. The lower tariffs apply to all electricity consumed in that period. To reduce overall energy bills, households need to use appliances (washing machine, dishwasher), prepare dinner and heat their homes in the off-peak periods. The advice for heating is to overheat the home by 1-20C during the off peak window so the house stays warm through the peak period when the heating turns off.
  2. OVO launched their Heat Pump plus tariff October 2023, where households pay 15p per kWh for all the energy used by the heat pump. A separate meter counts how much electricity the heat pump has used and relays it back to OVO who then re-credit your energy bill in the first week of every month. *Restrictions include; direct debit required, under 6,000kwh usage (over that and it's back to standard rates) and you must have a Vaillant Heat pump.
  3. The new EDF trial-tariff mirrors the Octopus offering two cheaper priced windows in the day, 4am-7am and 1pm-4pm, but it does not have the increase in costs over evening peak time. The trial is limited to certain areas of the UK.

If you have solar…

The Smart Export Guarantee (SEG) is a payment you receive for the excess electricity you generate through your solar panels and send back to the grid. This has taken over from the Feed in Tariff (FIT) the scheme that finished in March 2019. You do not have to sell your energy back to your energy provider, you can shop around, BUT most energy companies that are part of the SEG scheme and will pay more if you are already a customer.

NB. Prices rounded to the nearest pence.

The current top solar export tariffs are as follows:

  1. E.ON Next now have four export tariffs. The newest and best are the Premium Plus which offers 40p kWh - one worth mentioning - for E.ON customers can get 16.5p per kWh for their solar export.
  2. Intelligent Octopus Flux - as the name implies there are fluctuations in this tariff and it pays more if you can export at certain times of the day. For example exporting in the peak window of 4pm-7pm will pay you up to around 30p per kWh, other times of the day you will be paid 22p per kWh. You will need to have a GivEnergy battery to access this one but they do all the hard work for you. For importing energy, this fluctuates linked with the export rates and is more expensive at the peak 4-7pm window. However, your intelligent battery makes sure it is full by 4pm so you should reduce or eliminate the need for drawing from the grid at this time.
  3. Octopus Flux - The biggest differences between Intelligent Flux and Flux are the ability to have any battery type and slightly reduced rates in export. Exporting in the evening peak (4-7pm window) will see a payment of 26p per kWh, other rates throughout the day are less due to reduced demand, averaging around 16p per kWh.
  4. OVO and Good Energy. These seemingly offer a fair 20p per kWh rate, but both require installation via their partners.
  5. Octopus Fixed outgoing - If you are an Octopus customer you can have a flat 15p per kW hour - this is on worth mentioning as if you can twin this with the Octopus Agile tariff as your import tariff, which is flexible but the majority of prices are below 15p (the exception being the evening usage from 4pm to 11p). It can work well for many households who use battery power over the entire evening.

If you have an EV…

EV tariffs are based on load shifting (i.e. moving as much of your household electricity to the same off-peak window) to predominantly night time usage, also worth noting they are not covered by Ofgem’s energy price cap.

NB. Prices rounded to the nearest pence.

  1. The OVO Charge Anytime is an EV tariff with a 7p per kWh lowest rate to charge your electric vehicle. Much like their Heat Pump tariff you will be charged the standard rate and they will reimburse you the difference in your next monthly bill. All other electricity used is charged at the standard rate.
  2. E.ON Next drive tariff will provide 7 hours of low charge from 12am-7am for your house and vehicle, with a peak charge of 29p from 7am-12pm. Other rates will vary subject to energy prices.
  3. The Octopus offering provides reduced charging from 11:30pm-5:30am for the Intelligent Go tariff and 12:30am-4:30am for the simple Go tariff, this is for the vehicle and your home use.
  4. British Gas, cheap rate is from 12am-5am and this rate is fixed until May next year, again vehicle and home use.
  5. Ecotricity - from 100% renewable electricity this cheap rate tariff runs 12am-5am GMT every night (that’s 1am-6am when the clocks change for summer), both vehicle and home use.

If you have multiple renewables…

Generally our advice is as follows, and does depends on your personal use:

  • HP and Solar - prioritise your solar tariff
  • HP, Solar and batteries - prioritise your solar tariff
  • EV and HP - prioritise your EV tariff
  • EV and Solar - prioritise your EV tariff
  • EV, HP and Solar - prioritise your EV tariff
  • EV, HP, Solar and batteries - prioritise your EV tariff

If you don’t have any renewable technologies…

If your property is either rented or unsuitable for installing renewables you might want to consider switching to a greener tariff or install batteries to open your smart tariff options. You will need a SMETS 2 smart meter (the newest type of smart meter that can be switched easily between energy providers).

Green tariffs include supplying you with energy sources from renewables, namely wind, hydro and solar from commercial enterprises, but these tariffs can sometimes be more expensive. Batteries enable you to load shift and benefit from cheaper nighttime tariffs.

NB. Prices rounded to the nearest pence.

  1. 100Green - tariffs include Sparkling, Eko and Tide. The biggest plus point here is their gas is 100% green, generated from anaerobic digestion, great for the environment but it still costs to produce green gas so this is not the cheapest in terms of pence per kWh. We have not discussed gas in this blog, but the price cap is 6 pence, and 100Green prices are between 7.8-10p per kWh.
  2. Other options include suppliers that source energy from their own renewables or other green generators. Good Energy has 100% renewable electricity, gas supply is 10% biogas and they offset the other gas provision through investing in green renewable projects. Ecotricity is the other main player who can provide 100% green electricity, they are working at producing green gas from biomills and grass. Currently only 1% of their gas supplied is green, the rest is natural gas offset, like Good Energy, by investing in renewable projects.
  3. Octopus Agile - this tariff deserves its own paragraph. It is a tariff that stands out from the rest as it tracks the wholesale price of electricity in half hourly intervals and changes every single day. But, there is a rough pattern to the energy prices and you won't be surprised. Cheap overnight rates that build throughout the day and peak in the evening slot of 4-8pm, but not always. This risk factor makes Agile a tariff for the more adventurous consumer, and there is a price cap to make sure you never pay more than 100p pkWh. Historical data shows the vast majority of the time the prices are well below the price cap and at times Octopus will pay you to use excess electricity from the grid, in a ‘price plunge’. With Agile there are no renewable requirements and it is electricity only.

How much can I save?

We’ve done all the hard work, so whatever technology you’ve got for the first time ever all you can see the combined savings available and get smart tariff recommendations.

This will depend upon which technologies you have (solar, EV, battery, heat pump), how much energy you use and how willing you are to move other electrical uses to off-peak times, assuming that is a feature of the tariff structure.

We have built a free home energy calculator to do just that. Input the details of your home and we will provide you with an estimate of savings according to home and technologies present.

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