National Grid workers
(Picture: PA Media)For the last few weeks, Octopus Energy has been emailing me telling me to turn down the heating.
It is not a perverse new chapter in the cost of living crisis. It is a novel approach to the looming net zero crunch facing our power network. Octopus is working with the National Grid to “trial a big national ‘turn down’, where households come together to consciously use less energy at certain times – and get rewarded with free power for their efforts”.
Energy bills are subsidised in an effort to cut down on fossil fuel usage. While green energy is growing quickly, the grid is still forced to fire up the coal and diesel power plants to meet spikes in demand — the classic 5pm cuppa.
In an age of the power plant, this was fine. Simply shovel more coal when you know everyone is getting home. But reliance on fickle wind and solar means peaks and troughs can’t be managed as easily. What’s more, many green assets are in the North, making it expensive to cart the energy down south.
“The current market was not designed for net zero and left unchanged will impose excessive costs to consumers,” the National Grid Electricity Systems Operator warned recently. “A rapid change in how and where electricity is generated has shifted the requirements.”
The solution? The end of a single electricity price: the National Grid suggests either a zonal pricing system — London would be zone “F” — or a nodal system. Introducing dynamic pricing would help manage supply and demand.
Could it happen? Don’t rule it out. The Sunday Times reports that this week’s Energy Security Strategy from the government will include plans to allow onshore wind farms if local communities get to benefit from them through cheaper bills. That opens the door to a whole new system.
Businesses should start figuring out what it means for them before it’s too late.
Editor’s note: An earlier version of this column included regional electricity prices attributed to National Grid under a nodal system. These were indicative prices illustrating how the system would work, rather than predictions.
