Partner Article

Uptake of Time of Use tariffs still low, but set to increase

Research from Cornwall Insight has found both suppliers and consumers have made tentative steps to explore Time of Use (ToU) tariffs. However, adoption of these tariffs is anecdotally low at the moment, and ambitious innovation and uptake has been held back by slow industry processes and understandable consumer caution.

Key findings: • Currently, there are eight tariffs on the market with more than one rate throughout the day*. • Since Bulb updated its smart tariff trial and Green Energy UK temporarily retracted its three-rate TIDE tariff, only Octopus Energy’s Agile tariff offers more than two rates. • Widespread adoption is dependent on several changes in the industry, including the continued uptake of electric vehicles (EVs); the smart meter rollout; changes in industry settlement processes to encourage ToU pricing; and the development of smarter tariff comparison processes.

Oliver Archer, Senior Analyst at Cornwall Insight, said:

“Despite the low adoption at the moment, ToU offerings could become as popular as single-rate tariffs over the coming decades. According to modelling for the Electricity System Operator’s (ESO) 2020 Future Energy Scenarios (FES), more households will be incentivised to switch to ToU tariffs following the expected growth in EV ownership. The most ambitious scenario sees 50% of households using ToU tariffs by 2032.

“The assumption that ToU uptake will follow EV adoption is a credible one, with EV-users seeing clearer benefits in ToU pricing and reporting higher satisfaction when on ToU plans. Suppliers are clearly targeting their ToU offerings at EV users, with six of the eight available deals aimed at this consumer group.

“The rollout of EVs is not the only factor necessary to support ToU adoption. Delays have beset the smart metering programme, and the majority of households are still using traditional meters that cannot support these offerings.

“For suppliers, competitive pressure to be ahead of the pack is the main driver for developing these tariffs now. The financial case for encouraging the uptake of ToU tariffs will become stronger when Ofgem has implemented its programme of market-wide half-hourly settlement. Ofgem’s most recent indicative timetable suggests that it could be completed by mid-2025.

“For consumers, improving access and reducing complexity will also be key. BEIS has now begun the work needed to develop price comparison services for smarter tariffs, which will be essential for uptake beyond early adopters.

“The timescales for delivering these industry changes will matter if we are to realise the widespread uptake of ToU tariffs seen across the FES scenarios in the coming decades.”

*Excludes traditional economy 7 style metering arrangements

This was posted in Bdaily's Members' News section by Cornwall Insight .