National Grid is set to pay out more than £3m to households and businesses as part of a pioneering scheme that encourages them to cut their power use at peak times.
The electricity system operator ran its “demand flexibility service” – which incentivises households in Great Britain to use less power during a designated period – between 4.30pm and 6pm on Tuesday.
That followed the service being used for real for the first time on Monday between 5pm and 6pm, to help reduce the strain on the grid caused by the cold weather.
The scheme was piloted by Octopus Energy early last year before being rolled out to other suppliers in November, but was only enacted this week. More than 1m businesses and consumers have signed up.
During the trials, typical households saved about half a kilowatt hour, which will be worth about £2 on Tuesday, putting the cost to National Grid at £2m. Those funds will be passed on to those participating, with suppliers keeping a share to cover their costs.
In total, National Grid is expected to pay just over £3m to suppliers for the service over Monday and Tuesday, – with about £850,000 on the first day, and £2.1m for the longer session on Tuesday.
Octopus said 400,000 customers participated in Monday’s session and were offered £3.37 for each kilowatt hour of electricity they avoided during the period. Octopus will offer £4 for each kilowatt hour on Tuesday after National Grid offered higher prices.
Octopus will be participating in the scheme on Tuesday, as well as E.ON, Engie, GridBeyond, British Gas, Drax and Ovo, according to analysts at investment bank Bernstein.
Octopus estimates a customer who turns down 1kWh during 25 events at an average £4/kWh could save £100 this winter.
During early trials, the average saving for a household was 23p for each event, with some participants saving up to £4.35 for each session. On Monday, the Octopus customers who achieved the largest savings were paid about £8.75 for the hour.
Octopus estimated that its customers reduced the UK’s energy usage by about 200 megawatt hours – the same as the city of Bristol going off grid for an hour.
Consumers need to be signed up to the service and must have a smart meter to participate. Their supplier will typically give them about 24 hours’ notice of a saving session and consumers then have to opt in.
National Grid is attempting to balance supply and demand as a cold snap encourages Britons who have left their heating off because of high energy bills to switch it on.
The grid operator said on Monday night it had asked three coal units it has on standby this winter to warm up for potential use on Tuesday. The three units – at Drax in North Yorkshire and EDF’s West Burton plant in Nottinghamshire – were also prepared on Sunday to help with Monday’s supplies before being stood down. The coal units were also unused on Tuesday.
The units have been put on standby in case energy supplies are squeezed this winter, after Russia reduced the volumes of gas being exported to Europe.
There had been fears that Russia could cut supplies completely, having a knock-on effect in the UK and causing power cuts. However, the threat of this has receded somewhat because of the mild weather this winter.