February 27, 2024

In an Era of Energy-Efficient Technologies, Axing Economy 7 is a Big Mistake

The Government, in its wisdom, has made the decision to phase out night-time electricity tariffs (of which Economy 7 is the best-known example) by 2030.

This is the wrong decision – for the country, for business, for consumers, for net zero, and for sustainability in general – and in this piece we explore why.


Economy 7 – a brief history

Economy 7, as the night-time tariff approach most people are familiar with, embodies the essential characteristics and benefits of this kind of service.

Introduced in 1978, it featured a seven-hour night rate (from midnight to 7 a.m., although this can vary by supplier) some 20% cheaper than most night-time tariffs, made possible by economies in the night-time operation of the electricity grid.

Households and businesses could now, with a few changes in behaviour and habits, run their power-hungriest appliances and processes overnight at far lower cost.

Plus, coupled with devices like storage heaters and immersion heaters that loaded up with heat during the night and then released it when needed during the day, the service could deliver pretty much the pinnacle of cost-effectiveness.

And it has continued to this day. Although the gap between peak and off-peak prices has narrowed considerably, Economy 7 (and other night-time tariffs) continue to offer better value to homes and businesses – as long as they can push the greater part of their energy use into the night-time hours.

So why are these tariffs facing the Government’s axe?


The theory: Economy 7 lacks sustainability

In general, the thinking seems to be that whilst Economy 7 is thrifty – great news for those who use it, especially with the cost of living currently so high – it’s not very green.

Reducing energy consumption full stop is, it is believed, more effective than making that consumption cheaper at certain times, which may encourage consumers to use more of it.

Hence the Government’s assertion that the decision to phase out night-time tariffs is aligned with the strategy to phase out coal-fired power stations. Both are part of a strategy to reduce overall power generation. Basically, by implication, Economy 7 users are now dirty polluters who use electricity needlessly.

And with the number of UK homes currently relying on Economy 7 meters steadily declining, as energy suppliers promote the adoption of smart metering as the way forward(despite often unreliable mobile signals and subsequent billing confusion), both the principle of Economy 7 and how it is controlled are being framed as wasteful and archaic.

The truth: Economy 7’s finest hour?

But we disagree.

Yes, it’s true that Economy 7 and similar tariffs have their drawbacks. They may no longer rely on cumbersome dual meters, as they used to, but the transition to RadioTele switch (RTS) meters has been derailed by the BBC’s decision to switch off the signal that supports those devices.Over 820,000 homes in the UK were still using RTS meters at the last count.

And yes, it’s true that using electricity to generate heat during the night is less effective and less efficient than generating it in the day, as the night is colder.

But setting aside the financial benefits to users of lower-priced electricity for the moment, we believe Economy 7 and other night-time tariffs have the potential to be far more sustainable than anybody is currently giving them credit for.

Here’s how it works.


Charging, heating, sun

Firstly, it has to be asked if the Government has been asleep during its own policymaking, because its support for the move to vehicle electrification has created a need for lower-priced overnight electricity on an ever-growing (and soon to be massive) scale.

We’re talking here, of course, about companies charging their electric vehicle fleet. And although we’re unlikely to see another spike like 2020 – 2021, where the number of electric company cars soared by 1300%, more recent figures from 2022 – 2023 show an increase in fleet electric vehicles of around 33%, indicating a still-strong trend.

Plus, the move in many companies towards more electric or plug-in hybrid specialist vehicles (including forklifts and carts) is likely to push total electric vehicle usage still higher.

Why would a Government not want to keep electricity cheaper in this way, when it ultimately serves an end-use that is, in itself, sustainable?

But it’s heating that really shows where Economy 7 and other night-time tariffs could become, if the Government chose to keep them, a sustainability trump card.

This is because an overnight electricity supply, whilst not necessarily particularly sustainable of itself, can be used as part of a heating solution that certainly is.

By combining Economy 7 electricity with an electricity storage system – e.g. batteries – the stored electricity can be used to power air source heat pumps, which consume little electricity for the heat they produce, during the day or night. Less consumption from the grid, to greater effect, at lower cost!

Introduce solar PV (photovoltaic) panels into the mix, and things start to get really interesting. The solar panels, too, can charge the battery pack that feeds the heat pumps, so potentially much less of the Economy 7 - sourced electricity is used, which means much less of it needs to be produced – and so the overall sustainability effect delivered is greatly amplified.


Wrong decision, wrong time

Of course, what this does suggest is that it might eventually be sensible to scale Economy 7 generation down, as need for the principle continues but requirement for the quantity diminishes.

But cutting off night-time tariffs completely in 2030 will not only instantly penalise those who can least afford it, it will also effectively permanently cap the degree of sustainability that current energy-efficient technologies are able to attain. Mediocrity built in, as it were.

Economy 7 may not score a perfect 10 on all fronts, but six years doesn’t leave us enough time to develop anything with a better cost-sustainability ratio. Maybe the Government needs to reconsider.

Get in touch to find out how we can help make your buildings more energy-efficient, and lower their carbon emissions, using technologies that will reduce costs and pay back quicker in 2024.

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