Smart electricity tariffs

A smart tariff is a "Time of Use" (ToU) tariff - one where you pay different rates for electricity at different times of the day, or on different days. In general they offer you cheaper rates at night and some other periods of the day, and charge higher rates during peak usage time (normally 4-7pm), when the electricity system is normally under the most pressure, and using more expensive, polluting generation methods.  So they help you by providing cheap power at times when you want it, and they help the system by matching demand with supply. By contrast, the old style flat rates fail miserably at this - there is no disincentive for you to idly put on your dishwasher and tumble drier at 6pm, which maximises both system costs and pollution, when you could easily have done these things at other times of the day or night.

There are many different products customised to different consumer needs, but they all also help manage the electricity system by shifting demand from peak to off peak times. They have only been available since 2017, but have grown in popularity particularly driven by electric vehicle owners, who need plenty of power but can choose when they charge. But there are also tariffs optimised for heat pump owners, battery and PV owners. They are all likely to save you money compared to the old style flat rate, so long as you avoid very high peak usage.  Some especially cheap smart tariffs are bundled with the installation of a heat pump, battery or solar power - these tend to be offered by the big energy companies like Octopus or Ovo, so if you're embarking on installation of one of these, check out the kit/tariff packages available. (see examples )
You will need a smart meter to access a smart tariff. Price comparison websites seem to ignore smart tariffs (see right), so you may need to seek them out. Smart tariffs are much more limited with gas.

Remember, you can take control of your electricity - how much you use, when, and what price you pay. Don't be a passive consumer!

 

Which smart tariff?

 

There are two main tariff types:

• Static tariffs are Time of Use tariffs with fixed prices for named timeslots. Eg 18p from 2-5am and 1-4pm, 40p from 4-7pm, and 27.5p at all other times. So you know what you're paying and can plan/program your car, heat pump, dishwasher etc accordingly. There are many different static tariffs aimed at different customer segments, eg EV, battery or heat pump owners - Good Energy Smart EV and Octopus Cosy (for heat pumps) are examples here, though not necessarily the best. Economy 7 is a simple kind of static tariff. Static tariffs are attractive for their simplicity and predictability, but are not quite as useful to the energy system and so not such good value as dynamic tariffs.
  There are a small number of even cleverer, cheaper static tariffs which give very low fixed prices for EV and battery users, in return for the energy company having some control over your battery/EV charging, and discharging. They use your kit for profitable grid balancing, and give you a very low price (eg 7p/Kwh!) at certain times and for certain uses. You normally have to have specific hardware for it to work. Examples include Intelligent Octopus Go and Ovo Charge Anytime. Expect to see these tariffs increase in number and sophistication; they are an essential part of integrating EVs with the grid, potentially enabling your car or battery to become a revenue earner just like solar panels.

• Dynamic tariffs: these ToU tariffs change daily (eg Octopus tracker), or even half hourly (eg Agile Octopus). This is good for the energy system and so they generally come out cheaper than static tariffs, but to make best use of them you might have to track the the energy prices daily (in practice most people keep a looser eye than this). Prices tend to rise in the winter compared to summer, and there is also a risk that prices could rise significantly above other tariffs in unusual market conditions. This risk is normally managed by a) a price cap that stops it going really crazy if something happens in the energy market and b) the option to switch to another tariff. But you can't normally chop and change at a moment's notice if today's prices don't suit you. Dynamic tariffs are for the more engaged consumer, and those who can handle a little uncertainty, but they do offer the prospect of significant savings over standard prices, and they may well be cheaper than static smart tariffs too.

 

Smart Export too!

Smart tariffs are also now applied to export of your excess solar PV power, and this has been one of the most important developments in getting to Net Zero cost. In summer you may only use a fraction of all that solar PV you generate, but the rest of the economy can use it, and it's fair that you get paid like any other generator. The most recent year, we exported 3000 kWh at ~17p/kWh with  the Octopus Flux tariff, so we were paid over £500.

Again, you need a smart meter to do smart export. You only need one smart meter, the same one can handle both your import and export, but you will need to liaise with your energy supplier so that they can hook into the export side of it.

Home batteries can also be used with an export tariff, whether or not you have PV. You can charge them cheaply and export to the grid at peak export prices (normally 4-7pm). You are unlikely to pay back on the investment just from this approach though.

How to choose

To help you work through your options we provide a decision making tool below. We can make no one recommendation as it depends on your priorities and what power needs you have eg EV, solar etc. We do however think that some newer providers are much more innovative than the old guard, and in particular Octopus Energy is generally being the most innovative player in the sector, and offers a wide range of both static and dynamic tariffs. It also has a high Which? rating for customer service.