During last year’s Dynamic Demand Challenge Hackathon, the organisers asked me to form an impromptu team with another Roving Hacker. Together we designed a “capacity tariff” aimed at those living in fuel poverty (an estimated 3.5m UK households).
Our idea, PowerCube, is to limit the power that can be drawn by a household in exchange for a deep discount (50% or more) for the price per unit of electricity (kWh) paid by the consumer. This would be achieved by installing a device such as a relay switch on the main incoming power supply that is triggered by the smart meter when the power reaches a certain predefined level. Our pitch presentation at the end of the 36 hour Hackathon can be found here:
Benefits of the idea
The benefits of this tariff are many. Customers would benefit from reducing their outgoings on expensive energy, utilities would eliminate the need to buy electric at peak times when it is expensive by shifting large amounts of demand to off-peak times, and the environment would benefit as it would reduce the need for GHG-intensive peaking plants powered by fossil fuels like gas and oil.
Fuel poor customers often have poor credit history and therefore frequently receive their electricity via a pre-paid meter, notorious for their scandalously high prices. Because ‘Fuel poor’ householders are often in a situation where they are faced with the “heat or eat” scenario, our belief is that the 50% discount of the PowerCube tariff is something that would get real traction.
Weaknesses of the idea
Capacity tariffs are not a new concept and have been trialled on the continent before, to mixed levels of success. We believe that targeting them at the energy poor section of the market, for whom energy prices are a real and priority problem, will give the concept a new lease of life as this application will add real value to this particular market segment.
The PowerCube tariff idea relies on a physical device to give a visual/auditory signal to indicate when the household is close to its limit. Ensuring that this signal is simple to understand and able to inform action is vital.
It is also important to realise that the whole concept of a capacity tariff means that people will need to learn the relative power demands of their devices, which could prove difficult for consumers who are not very tech-savvy. However, a counter argument to this is the fact that non-commercial sailors intuitively learn how to ration their power use on a boat to stay within the fixed capacity limits of their vessel’s battery supply.
Finally, the level of the capacity ceiling will probably need to be fixed and chosen very carefully, as it will be too confusing/undesirable for customers to live in a situation where their allocated capacity ceiling is changing unpredictably. It also might need to be set on an individual basis, which could prove expensive if not an automated solution is not developed well.
Opportunities for the idea
The tariff would provide consumers with savings of around 50% from their electricity bills, which is a significant amount of money (around 5% of their annual income when using the old definition of fuel poverty).
It would also allow the UK to shave a significant amount of peak load if designed correctly. For example, if 5% of the UK’s energy poor households (3.5m*0.05=175,000) were to sign up and reduce their peak demand by 2kW it would be a 350MW saving, equivalent to an average UK natural gas power plant gas.
Threats to the idea
One big threat to this would be a change in the demand of a household, or a consumer switching tariffs after receiving the PowerCube device.
Another threat would be weaknesses in the UK smart meter roll-out, such as low up-take or hardware that is incompatible with the infrastructure of this tariff offering.