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Last edited 24 Feb 2023
From economy 7, 9 and 10 to time-of-use tariffs
 Economy 7, 9, 10 and others
Economy 7 (E7) is a reduced rate off-peak differential tariff for electricity consumed during 7 hours overnight, when the electricity is in low demand and at its base load. The tariff requires a special meter with two different readings one low (for the night rate) and one normal (for the standard day rate). It is usually found in homes that use electricity for both heating and hot water, often because the local area does not have access to gas.
The term Economy 7 was coined by Jon Marshall, first mentioned of in 1978 and recorded in the book "Electricity Supply in the UK: A chronology by the now-defunct association of nationally-owned electricity companies; The Electricity Council. "A new off-peak tariff known as the 'Economy 7' tariff was introduced in October . It featured a seven-hour night rate some 20 per cent cheaper than most night-time tariffs, made possible by economies in the night-time operation of the system."
Night storage heaters are often installed alongside E7. They contain high thermal mass materials such as bricks, which are heated up overnight when the electricity rate is cheaper, and this heat is released during the day, in some cases with a small electrical fan (running on the normal tariff) to act as a blow heater. In standard night storage heaters once the bricks have exhausted their heat and cooled down the the heat source has run out until it can be heated again overnight, but some models also include a standard heating element meaning they can be used during the day but at the higher tariff.
There are a number of other reduced rate or multi-rate tariffs which are usually determined by geographical area in the UK as well as the type of meter that is installed. The most similar by name and nature is Economy 9 (E9) which offers 9 hours of reduced rate tariff, as opposed to 7 hours. Off-peak (type 1, type 2 and type U), similarly offer differing rates between day and night as does Warmwise, offering 8 hours at a reduced rate.
Economy 10 tariff (E10), is yet more complex as it offers three different rates amounting in total to 10 hours, such as; three off-peak hours in the afternoon (e.g. 1pm - 4pm), two in the evening (e.g. 8pm - 10pm) and five overnight (e.g. 12am - 5am). Heatwise runs in the Midlands on a similar principle.
With increasing pressure to reduce carbon emissions, which includes reducing the reliance on gas, staggering the charge rates can encourage a better spread in the use of electricity and can be an important aspect to consider in terms of energy management. In general the notion of spreading the load in terms of energy use can help with reducing peaks in demand (as well as troughs), which in turn help in the introduction of renewables and in providing a more consistent grid supply. Although less common today, because of changes in media communication and the influence of the Internet on viewing times, the principle is best described by the term TV pickup - showing how event related behaviour when aggregated can have significant impact on demand.
In more recent years the difference between day and night rates has increased, with reductions of around 30%, however in some cases complex tariffs can also result in an increase in the standing (or fixed) charge as well as an increase in daytime rates.
The gradual introduction of smart meters has allowed an increase in the granularity of data available around energy use, meaning users and suppliers can measure use levels up to every half hour. This means that the grid can better assess use patterns in near to real time, whilst energy companies can offer tariffs that better match supply and demand. So in effect they can offer complex tariffs, similar to economy 7, 9 ,10 or other differential tariffs, based on specific times. There are over 20 million domestic smart meters now installed in homes in Great Britain, this smart meter data is set to become a crucial tool for energy research, energy management and potentially in the way electricity use is charged.
The main advantage to the consumer is that similar to the older variable rate charging systems they can be offered as time-of-use tariffs, though in practice this has and continues to be less than plain sailing. Whilst as early as 2017 there were reports of some of the earliest time-of-use tariffs, by 2020 an increasing number of households had smart meters installed, although this was hampered by the pandemic. At the end of 2021 Business, Energy and Industrial Strategy (BEIS) reported that over 50% of all meters in the Great Britain were smart meters, however these were divided into 3 types; SMETS1 (15.3 million), SMETS2 (11.1 million) and 1.3 million with advanced meters.
Time-of-use tariffs, also known as smart electricity tariffs, are possible once a customer has a smart energy meter that records energy consumption on a half-hourly basis. Energy companies, knowing the half-hourly energy use can offer a variety of new types of off-peak tariffs that charge different rates for electricity depending on the time of day according to the general demand at the time and the supply available.
The options described above in effect have similar goals in trying to balance the demands for energy that are placed on the grid and the supply of energy available from the grid, which may increasingly vary with the expansion of renewables such as wind and solar.
Whilst the meter system installation has in general progressed well, the offering and uptake of time-of-use tariffs has been slow, partly blamed on the concurrent disruption to the energy markets that occurred after the Russian invasion of Ukraine, leading to the energy crisis. Whilst significant profits were reported by larger energy companies, many smaller energy companies left the market, reducing confidence and reluctance to offer the new design of tariffs. However in 2023 a number of energy companies were offering time-of-use tariffs, often directly related to EV (electric vehicle) users and the need for car charging over night at off-peak times.
A service recently trialled by the National Grid in 2022 called the Demand Flexibility Service (DFS) actively engaged with large numbers of users during what they called events, and rewarded them for not using power during certain peak winter periods. The events were preset, known periods when demand could potentially be higher than supply, for example during darker winter months. The service informed consumers of the events and rewarded them for delaying their usage until the grid had higher supply or less demand. This helped avoid potentially bringing carbon intensive power plants on line, possible overloads and potential power cuts. The trial was reported as a success by the National Grid ESO - see "World-first Demand Flexibility Service exceeds expectations with businesses saving thousands of pounds while reducing carbon emissions" in January of 2023.
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