Tariffs

A lot of the discussion centres on technology but the behaviour of consumers is also important.  There is a conflict between the business model of energy companies and the desirability of managing consumption to achieve sustainability and energy security.  The traditional business model requires that a business maximises sales whilst governments want us to consume less energy.  It is important that energy companies are profitable so they can function as reliable suppliers and make investments in infrastructure.

The most common energy tariffs are a combination of a standing charge and a fixed unit price.  Whilst this is simple, it does not provide consumers with much of an incentive to manage their consumption other than a fear of big bills.  Other designs of tariffs could be offered which might provide a positive incentive.  An offering must be fair (i.e. not become a trap for the unwary) and come with protection for vulnerable people (i.e. you don't want people sitting in cold rooms too frightened to turn on the heating) and they should be optional.

One possibility is to offer an incentive to cap the rate of consumption, The energy company benefits by having flatter demand and does not have to invest in capacity to meet peaks, such as the one that occurs in the early evening when people cook and sit around the house.  The graph shows the what a hypothetical consuming 12 kwh per day might look like, the left hand graph assumes as standard fixed rate tariff whilst the right hand one has consumption capped at 0.7 kw/hour.

The consumer might achieve this with some form of energy management, task shifting (i.e. running the washing machine at times when other devices are off) and maybe the integration of some storage. For a household with an electric or hybrid vehicle, the traction battery could also supply the home with energy during the evening, then charge itself overnight at off-peak rates.  As with any scheme there are challenges, one might be washing machines which draw 1 - 3 kw for a few minutes during their cycle.

Another possibility is a progressive tariff which provides a discounted rate up to some level of consumption, after which the rate increases, the graph is illustrate the principle with an arbitrary chosen threshold.

Whilst this tariff would be popular with low energy households, take up by high energy consumers would be low.  However, if combined with a smart meter located in a prominent location and not under the stairs), would provide an incentive for some to manage their consumption.