Who benefits from the new Demand Flexibility Service?
Most households in the UK, if not globally, are reducing their energy consumption and more creativity is emerging on how do this. From officials in Japan recently challenging cultural dress codes by encouraging people to wear turtleneck jumpers, to the Eiffel Tower being ‘switched off’ early. But as well as cutting energy use, can households save on their energy costs by shifting their energy use to a different time?
A new offering from the National Grid is testing this. The Demand Flexibility Service (DFS) incentivises people to use less electricity during specific periods of time.
Being flexible with our ‘demand’ can help reduce energy costs for everyone in the longer-term by maximising the use of cheaper renewable energy sources and reducing infrastructure costs. But it creates an interesting new challenge, in that when we use electricity is becoming as important as how much electricity we use.
As part of its pioneering Smart & Fair research programme, the Research & Analysis team at CSE has been monitoring the energy market for innovations to help consumers shift energy use out of peak periods or into times when there’s more renewable energy.
Who stands to benefit?
We want to know who stands to benefit from new services, and how energy flexibility can help reduce fuel poverty rather than risk increasing it.
Much current innovation focuses on electric vehicles, but this excludes most of the population. However, the new Demand Flexibility Service (DFS) is open to anyone with a smart meter. This creates a real opportunity for less well-off households to gain from the service. But it’s important to think through the benefits and risks for different households and ensure appropriate advice is available to help people to assess whether the service is right for them.
How does the Demand Flexibility Service work?
‘Peak time’ (4-8pm) is when there is highest demand for electricity as people across the UK cook their evening meal, watch TV, shower and do other energy-using household activities.
Power stations fire up to meet this daily increase in demand – and the majority of these are gas-fired with high carbon emissions. With gas now in restricted supply, there might come a time in the cold winter months when there isn’t enough gas both to heat homes and to meet electricity demand.
The DFS addresses this. Customers sign up to participate in ‘saving sessions’ or ‘turn down events’ via an energy supplier (the full list of participating suppliers is here). Once registered, households will receive a day’s notice when a turn down event is happening and can choose whether to join in.
If they do opt in, they’ll be reminded just before the event and encouraged to reduce their electricity use during the period. They will get a credit based on how much their electricity use went down compared to their previous usage (per kilowatt hour). The Association for Decentralised Energy has a handy guide, and more details are on the National Grid’s website.
Based on results from a previous trial, National Grid estimates that typical households can save up to £100 over the 5 month trial. Credit is calculated for any amount of electricity reduction so low energy users can still benefit, albeit to a lesser extent.
Who can participate in the Demand Flexability Service?
Anyone with a smart meter can opt in. Even if households are not offered the service by their existing supplier, they might be able to use a different scheme (more on this below). However not everyone will be able to benefit equally, because shifting the time of electricity use is easier for some households than others.
For example, families with chilren are less likely to be able to delay their evening meal or avoid all use of electronic devices during a turn down period. Meanwhile, using appliances outside of peak time simply doesn’t suit some people’s schedules. And crucially, many of the millions of people in fuel poverty are already using as little energy as possible, and therefore have nothing left to shift.
Households most likely to gain from the DFS are those that:
- Have average or high electricity consumption.
- Understand what in their home uses the most electricity (for example electric showers, heating, immersion heaters, laundry appliances, dishwashers and electric ovens).
- Can easily change when they use these devices without negative consequences (for example switching off a heat pump in a well-insulated home for a few hours may not affect the warmth felt but switching of an electric heater in a poorly insulated home is likely to be felt immediately).
- Have additional technology to support shifting, for example home batteries that store electricity for use at peak time, or smart devices with apps that control appliances.
For some, smart devices may be unaffordable, too much tech hassle, or may fail to operate in the home due to signalling issues. There’s also the environmental impact of the manufacture and running costs of smart devices to consider.
There are alternatives to smart devices – for example instead of smart plugs, manually switching appliances off or using inexpensive timer plugs. ‘Appropriate technologies’ like this can build people’s understanding of flexing demand and make the benefits more open to everyone at lower environmental cost.
The energy advice sector impacts
Helping people understand these requirements is a complex task for an advice sector that’s already overstretched. Energy advisors need to prevent desperate households from taking extreme steps to try to earn some credit, but also support those that could see a saving.
Key points for energy advisors:
- The DFS service relates to electricity use only, not energy use in general.
- Providers offer different incentives and call the service different names like ‘Saving Sessions’ or ‘Winter cashback’. Check the list of approved providers before signing up.
- Households need to opt into the service and each individual turn down event.
- There are no financial penalties if households opt in and can’t shift, but remember that it takes effort to plan shifting and the whole household needs to act.
- It works well for those with regular high evening electricity use who can change this with no consequence like households that normally have an electric oven running one or two hours in the evening, but are happy to cook earlier, later or use a microwave.
Finally, households that have electric heating and access to a warm space outside the home may be tempted to sign up and earn some credits by leaving their home cold during turn down events. Warm space providers could align their open times with the National Grid turn down events which are likely to fall on cold evenings. But, as most readers will know, there are negative consequences to letting homes get very cold. At CSE, we’re not encouraging people to take this step. We’re continuing to work with our partners calling for the government to make more funding available for people in cold homes.
Simple solutions to make the Demand Flexibility Service accessible to everyone
We need simple solutions to help make demand flexibility accessible to all who could benefit. We need approaches that are wise in terms of resource consumption. And we need an energy advice sector that can support households to become more flexible with their energy use and accessing the cost savings.
One benefit we all stand to gain from the National Grid’s experiment is a better understanding of what it takes to flex our demand and what support and incentives households need to get the most out of being flexible with energy. CSE’s research and analysis team wants to hear about experiences with the DFS, so please do get in touch if you’re participating, or if you’re advising households on how to participate.
But alongside any experiments, what we urgently need is more funding from UK government to support people in fuel poverty. Staying healthily warm is a basic human right and it’s appalling that so many people are struggling with cold homes in the UK. Every day is fuel poverty day on our energy advice line. It’s vital to work together to highlight what’s going on, and to keep evaluating new energy marketing offerings until we have a greener, smarter and fairer energy system.