This winter we face an urgent need to reduce our electricity demand because of the shortage of gas and its exceptionally high price. Ireland has concentrated on developing renewable wind energy, along with gas-fired generation for when the wind does not blow. Coal and peat have been gradually downgraded because they are much worse for global warming. So we are very dependent on gas for our electricity.
When the wind blows, wind power can provide much of our electricity needs over the day. When it does not blow, we use gas generators. One type comprises a jet engine to turn the generator, combined with a boiler, where the exhaust from the engine generates steam to drive a second power plant. Like heating a kettle, these boilers take a while to warm up. These types of generators are efficient when they run all day, and convert up to 60 per cent of the gas’s energy into electricity.
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However, electricity demand peaks between 5pm and 7pm. The two-stage gas generator is not suitable to provide the extra power for this peak, as it takes too long to get the boiler working. Instead, a different type of generator is used, which is just a jet engine that can start and stop very rapidly. However, this plant needs approximately 50 per cent more gas to generate electricity than a two-stage type. Thus it is both worse for the environment and 50 per cent more expensive.
Differentiated prices
Switching demand for electricity from the teatime peak towards later at night would allow us deploy the more efficient type of generator, save a lot of money and cut emissions.
Many of us already have smart meters and the installation programme is to be completed by 2024. These meters enable energy companies to charge different prices throughout the day, reflecting the cost of generating electricity at different times. Differentiating prices in this way can encourage consumers to avoid using appliances at peak times to lower their bills. A Northern Ireland friend who had such a system opted to tend his garden between five and seven each evening, deferring dinner.
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But to respond effectively to price signals, households need to know how many units they are using at different times, and which appliances are the greediest. How and when they get this information is critical to influencing behaviour. This is the lesson from Economic and Social Research Institute research commissioned a decade ago by the Energy Regulator. The research used an extensive experiment to test how smart meters might work, and how households would respond to differential pricing over the day to alter the timing of consumption.
Red light
The findings showed that smart meters, and varying charges at different times of the day, could potentially bring about a significant shift in demand and its timing. Critically, however, the scale of response would depend on how usage and cost information was communicated to consumers. The experiment showed a very weak response when the only usage information came in the two-monthly bill, and especially weak for poorer, less well-educated households. However, where an in-house display, such as a red light, warned that electricity was very expensive, then a bigger reduction in demand was possible.
Roughly half of households already have smart meters. But they cannot get information from them on their current consumption patterns unless they sign up to a change to a time-of-day tariff. That’s plain daft. It’s asking consumers to take a gamble they may save money by making the switch – without knowing what is driving their current daily tally of units used. There’s also the risk that customers who switch to a variable tariff see their bills go up – not because they are using electricity inefficiently, but because prices are on the rise anyway. That risks a real backlash against smart metering and variable charges.
There’s no provision yet for in-house displays, which we know are what influences behaviour, nor for an easy app to help any consumer with a smart meter check how they are doing. It’s complex for people to choose the best strategy where there are variable tariffs. A lot of thought, based on real-life experiments, needs to go into how best to inform consumers about real-time use, and enable them to choose the best option for their household.
If we are serious about reducing demand at peak times, customers can’t be kept in the dark about their usage patterns and what’s costing them money, when their smart meter already collects this information. Sharing this information now is more likely to get people to reduce their peak demand.
