Majority of Brits want time-of-use tariffs

Some 60% of people are already using time-of-use tariffs or are considering switching on to one, official government polling reveals.

The latest public attitudes tracker published by the Department for Energy Security and Net Zero (DESNZ) reveals that 9% of people surveyed said they were already on a time-of-use tariff, with a further 51% saying they would be likely to switch to one.

In fact, only 23% of people said that they would be unlikely to switch, with the remaining 17% not responsible for their energy billing.

Octopus Energy’s global head of flexibility & electrification Alex Schoch told Utility Week that the numbers “are not really a surprise” and “reinforce” the company’s focus on offering smart tariffs.

He said: “We’ve always said that there is no single tariff to rule them all […] so having as many different tariffs to solve customers different needs has got to be the way forwards and time-of-use has a big part to play there.

“We see incredible growth and demand for our smart tariffs and we see the market heating up as well. Other suppliers are now coming out of an energy crisis lockup and seeing what they can now offer that is different.”

Schoch added that while electric vehicle-targeted tariffs are the most competitive smart tariffs on the market right now, interest in time-of-use rates goes beyond low carbon technologies.

In particular, Schoch pointed to the fourfold annual increase in customers on Octopus’ Tracker tariff which changes costs every day based on wholesale costs.

He added: “From a mass market perspective, what we have seen in the last year in particular is that there is real appetite and interest in time-of-use offers and that is not just in the context of electrification or customers who have an interest in low carbon technologies.”

Of the 23% of people who said they were not likely to switch to time-of-use tariffs, the main barriers were: not wanting to have to think about when to use electricity (34%), insufficient cost savings (32%) and being happy with their current tariff or provider (30%).

Other barriers included a lack of knowledge (19%), a lack of ability to budget (14%), a lack of trust of energy companies (14%) and not having or wanting a smart meter (13%).

Schoch added that ensuring people who are interested in switching to a smart tariff take such action is largely dependent on the acceleration of the smart meter rollout.

Latest annual figures from Electralink show that smart meter installations appear to have hit a ceiling in the past three years, with the total number of annual installs levelling out.

Electralink’s figures show that more than 2.4 million smart electricity meter installations were recorded in 2023, a fraction higher than the 2.37 million installs in 2022 and marginally lower than 2021 which saw 2.41 million installs.

The government originally planned to complete the rollout by 2019 but latest figures show just 59% of all meters are smart or advanced meters. Suppliers now have until the end of 2025 to complete the rollout.

Schoch added: “The single biggest requirement for smart tariffs is smart meters being rolled out and them all working. If just 50% of people now have a working smart meter then that effectively means 50% of people can’t have smart tariffs.”

While Octopus has long championed the benefits of time-of-use tariffs, other market players have issued caution that significant growth in time-of-use tariffs will bring an end to diversity of demand for networks and challenge their ability to maintain reliable supplies.

These warnings were issued during interviews to inform Utility Week’s report, Market-wide settlement reform: a moment of opportunity? in which anonymised leaders from across the energy industry shared their expectations about the extent to which the arrival of market-wide half-hourly settlement (MHHS) will unlock valuable industry change and contribute to the net zero transition.

One detractor – a director at a well-known energy supply company – argued that the common belief that there will be a proliferation in time-of-use tariffs and engagement in demand-side flexibility is ill-founded.

This individual said that “if customers really wanted these kinds of products then surely you’d have seen them flocking to the couple of suppliers in the market who already offer them – that hasn’t really happened”.

They continued: “We are attempting to future-proof the energy system for something that is not really proven – do we really think consumers want their habits forcibly changed by price signals? I’m not sure.”

Acknowledging that there is broad consensus in policy, regulator and industry circles that demand-side flexibility is needed for an affordable transition to net zero, the same leader reflected: “I do think we are heading for that world, but […] I think you need a higher proliferation of EVs, you need a more mature DSR [demand side response] market, you need more smart tech in people’s homes.

“We don’t have enough of these things yet to drive really significant behaviour change and load shifting.”

Other respondents to the report also raised concerns that time-of-use tariffs could drive a wedge between those able to engage in them and those who can’t, exacerbating consumer vulnerability issues.

Responding to those concerns, Schoch told Utility Week that shifting to a consumer-centric energy future will benefit everyone.

“To run a energy system as cheaply as possible it requires a fundamental shift in how we think about supply and demand,” Schoch said. “Historically all energy systems have just been supply led.

“The outcome of current transition is a £4.3 billion a year cost just for balancing at an ESO level. Now just imagine a world in which we can dramatically reduce that because we – as a whole market – are truly able to activate the demand side then that benefits everyone and balancing costs go down for everyone.

“In the same way that there are saving sessions on the demand flexibility service you can participate, if you don’t want to participate you don’t have to but there is a whole system benefit there.”

In January 2024 Utility Week established its Flexibility Forum, in association with our strategic partner CGI, to help break down barriers to energy flexibility growth and provide an independent setting for sense-checking the direction of travel in flexibility market governance and regulation. The Flexibility Forum community includes stakeholders from across the energy value chain. Outputs from the forum to date include a report on the status of demand side flexibility markets in GB and a review of discussion at the Forum’s first meeting.