Too lengthy, didn’t learn…
- UK renewables are at a file excessive, this yr alone electrical energy costs dropped beneath £0 throughout 135 hours resulting from extra renewable power being generated.
- Throughout these instances, wind farms are sometimes paid to close down to stop grid overload. At Octopus, we predict a much better resolution is to permit prospects to make use of it as a substitute.
- Even when the wholesale value goes unfavorable – a development which is growing and signifies an power surplus – the retail price of electrical energy by no means is due to Remaining Consumption Levies.
- Eradicating Remaining Consumption Levies from all versatile consumption is important for decreasing renewable power wastage and reducing buyer payments.
Absorbing renewables when it’s ample: demand flip up
As we embrace electrical alternate options to gasoline boilers and gasoline automobiles, the electrical energy demand is rising and turning into ‘peakier’. Flexibility is all about shifting and spreading power peaks to match instances the place renewables are producing electrical energy. The potential annual financial savings from client flex may attain over £4.6bn by 2030, saving 14% from everybody’s electrical energy invoice. On this yr alone, there have been 135 hours the place renewable technology was in surplus, and that is anticipated to rise to 50% of the time by 2035. Throughout these instances, wind farms are sometimes paid to close down to stop grid overload.
Somewhat than letting these useful inexperienced electrons go to waste, we imagine in tapping into family flexibility to take advantage of them.
We’ve experimented with making electrical energy free to customers throughout instances of surplus. Firstly, two schemes in collaboration with UK Energy Networks and Nationwide Grid’s NESO concentrating on particular community hotspots of renewable curtailment. Prospects proved extremely aware of our Energy-ups classes, see graph, and members have saved £100/yr on common.
Then this summer season we began providing 1 hour Free Electrical energy Periods nationally in response to drops within the wholesale electrical energy value. In simply 5 weeks, 750k+ prospects signed as much as this product and as a collective, prospects turned up by over 2.2GWh throughout 6 classes.
Wanting on the graph above, it’s clear that there’s an unlimited quantity of flexibility to the households’ consumption. It additionally seems that prospects discover new methods to make use of that free electrical energy moderately than purely shift their utilization from different instances. This doesn’t imply power is wasted; utilizing free power to do one thing further, like baking a cake or heating your own home extra, nonetheless boosts the buyer’s welfare and well-being. We additionally noticed some power shifting between days (charging EVs, washing or batch cooking). With electrical energy costs rising once more, it’s completely important customers can profit from low-cost electrical energy when it’s ample, however current coverage doesn’t help this.
Even at instances when it’s so windy and sunny that wholesale costs flip unfavorable, letting our prospects profit from this comes as a price to us as a provider.
Introducing: Remaining Consumption Levies
The retail price of electrical energy (i.e. the worth we face as a provider) is extra than simply the wholesale value, it’s additionally community fees and Remaining Consumption Levies (FCLs). These recuperate prices from help schemes, akin to subsidy for renewables and apply to electrical energy imports solely. Collectively, these fees price round 6p/kWh off peak and are even greater at peak time. FCLs account for a couple of third of the retail value of electrical energy, and these prices are anticipated to rise within the coming years.
Recovering these prices through the electrical energy invoice is problematic, as a result of it 1) makes electrification costlier; and a pair of) distorts incentives for client flexibility.
Why FCLs are a blocker for client flexibility
FCLs basically improve the price of electrical energy as a result of they’re charged on a volumetric foundation (i.e. p/kWh). This implies they distort the true price of electrical energy and stop actions which can be within the system’s finest curiosity – and stop prospects from having the ability to profit from cheaper power.
FCLs even have a particularly unfavorable influence for dwelling batteries and vehicle-to-grid; as FCLs are charged on import solely, the buyer has to pay FCLs for electrical energy going into the battery, however doesn’t get this refunded when that very same electrical energy is exported to the grid later, whereas one other client offtaking the electrical energy from the battery once more has to pay for FCLs. We’ve lined this in additional element right here.
Prospects are prepared, however market alerts are falling quick
Octopus advocates for the elimination of FCLs distorting influence on versatile consumption. We’ve seen from Energy-Ups and Free Electrical energy Periods that prospects are prepared to reply to market alerts. With out FCLs, all suppliers could be incentivised to go on unfavorable wholesale costs and we’d see extra revolutionary buyer choices, particularly, if coupled with the introduction of locational wholesale costs. The instruments we have to stimulate buyer flexibility exist already, the main target now needs to be on sharpening market alerts and eradicating the limitations so customers can reply effectively to them.
