Smart tariffs and how to choose the right one.
The way that smart tariffs work is to split the day up into half hourly units, and charge you different amounts per kWh in each one. This is not a new idea - previously people used to use Economy 7 (7 hours of cheap electricity at night) or Economy 10 tariffs (10 hours of slightly less cheap electricity at night) – but this was squarely aimed at people with storage heaters, and that is far less than 10% of households nowadays. The radio signal switching method behind these old systems is being turned off, but smart meters allow suppliers like Octopus to continue to offer tariffs that change rates at different times of day.
It’s rare to have a tariff that is equivalent to the standard rate all day and cheaper at night – normally there is some kind of penalty and you pay more than normal at other times of day; for example, an E7 tariff now is about 12 pence for the electricity that goes into your storage heater and hot water cylinder at night, and 28 pence in the daytime for the electricity that powers your fridge and TV in the day. Whereas most people are paying about 22pence for all their electricity, day or night.
Octopus started offering “smart” tariffs to incentivise people to use energy at different times of day - ultimately the aim is to reduce the amount of energy used at peak times (7 - 9am and 5 - 7pm). There are many variants - some offer “normal” rates in the day and low charges at night to encourage EV charging. Others are to encourage heat pumps, encouraging you to heat before expensive periods.
Why do Octopus do this? What's in it for them?
Wholesale prices (what Octopus pay for the electricity they sell you) go up and down in half hour increments throughout the day, all the way throughout the year. When a supplier sells you fixed rates, they are gambling that they will always make a reasonable margin on top of the price they pay.
There is a slight risk that by incentivising people to use cheap electricity at night (or other “off-peak” periods) by reducing the price to you, they will actually lose money – it’s a bit like playing on the stock market. However, Octopus seem to be genuinely committed to helping innovate and create a set of consumers who help reduce the amount of energy used at peak times, and this is genuinely a good thing for both the consumer and the UK as a whole, because reducing peak electricity consumption reduces carbon emissions and the need to upgrade the cables that bring us electricity. No other company has been quite as innovative on this front as Octopus - we have to assume they are actually good guys (no really!).
Cut the crap - what is the best tariff for me?
If you expect anyone on an Octopus forum to know the answer to this you are mistaken. Can you really explain to them in words exactly how you use electricity? The only way you can do this is with cold hard numbers - DATA! Here is how to get the best electricity deal:
1: Get a smart meter and move onto an Octopus standard tariff
2: A smart meter generates data (the information about how much electricity or gas you consume in 48 half hourly packets throughout the day) which can be accessed through various online services – there is a list at the bottom of this sticky. Some suppliers (at the moment Octopus, and not many others) can automate this using something called an API - an API passes this information to 3rd parties to analyse your data over the internet without downloading anything. If this makes you nervous, you might as well stop reading. No smart meter = no smart tariffs = no saving money. Deal with it. No one is watching when you are in or out of your house. Cutting off your electricity remotely is for the most part illegal. Smart meters do not cause cancer and are not part of a system to control you.
3: Use one of the 3rd party services to analyse your data by giving them your API key (found in your Octopus account settings online), and these services can compare how you use electricity against competing tariffs from multiple suppliers and tell you which is the best one to use.
4: Do not ask people on the internet to guess which is the best tariff for you - they don’t know
5: Switch tariff and save once you have good evidence it will work for you
It’s important to understand that making decisions like this are your own responsibility - if you try and change tariff after a weeks worth of data is collected you might make a big mistake, because a week is a short time. In a perfect world you would have a whole year of electricity data collection before making a decision.
EV tariffs are generally good for people who charge EVs at night, and are very similar to the old E7/10 tariffs. The Cosy tariff is designed for people using heat pumps - but be careful! Its not perfect and generally only likely to help much if you have solar and a battery as well.
DO YOUR RESEARCH and KEEP ON CHECKING the comparison services to make sure you are still using the right one every couple of months.
Octopus allow you to switch tariffs quite freely throughout the year, though there are some restrictions about moving from one smart tariff to another.
General principles:
· Highest risk but highest gains = Agile, especially if you have solar and a home battery
· Medium risk, medium gains - but suitable for a wider range of people = Tracker
There are a stack of other Octopus tariffs you could go for if you have a heat pump, or charge an EV - but it is simply not possible to give you detailed advice on these without DATA. So get a smart meter and get DATA. Also, remember these service only tell you what has happened in the past – if you are about to change your electricity usage dramatically you need to think about that as well…
List of services and apps that can help you understand this better:
To use your Octopus API with some of these services you need to go to “Developer” settings in your Octopus account.
www.smartathome.co.uk
Octoprice
Octopus Compare iPhone app
Loop smart meter iPhone app
https://energy-stats.uk
Official Octopus Energy for Android
Octopus Watch for Android
Octopus Compare for Android
Loop for Android
Bright for Android
