Blog Post

What are Smart meter and Time of Use tariffs?

Richard Simmonds • Apr 26, 2021

More energy suppliers are introducing new tariffs aimed at supporting consumers with smart meters and electric vehicles. We take a look at these tariffs and why new market entrants should consider offering them.

What are Smart Meter and Time of Use Tariffs?

In short, they’re the same thing. Without smart meters, time of use tariffs are not possible.

Time of use tariffs is all about the ability to pay different rates at different times of the day. Time of use tariffs drop the price of electricity when demand is low and increase the cost in times of high usage.

They already exist in the form of the old Economy 7 scheme which would see consumers on the tariff pay half the normal rate of energy for 7 hours over night.

With smart meters, however, time of use tariffs can break the 24 hour day into several periods and charge at different rates. For example, an electric vehicle owner can charge their car at a lower rate over night as well as plan their other usage throughout a 24 hour period.

In order for these tariffs to be affective an energy supplier has to install a smart meter into the property.

Also read: Debunking the most common myths about Smart Meters

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Why should Energy Suppliers introduce Time of Use Tariffs?

The smart meter rollout is a key part of the governments plan to make the nation go greener and make the nation more energy efficient. The rollout will see all domestic existing electricity meters (or dumb meters) being replaced with smart meters.

A dumb meter can only measure how much electricity flows into a property with the meter reading going up for every unit or kWh of electricity consumed.

In comparison a smart meter measures a wider range of factors and most importantly automatically takes meter readings and sends them direct to a supplier. This results in no more estimated reads and makes energy billing far more accurate and efficient.

The drive shift towards renewable energy, electric vehicles and a greener way of life seems to be inevitable with the government continuing to issue new mandates and targets for the country to slash carbon emissions.

Energy suppliers should see this shift as an opportunity and new market entrants should consider introducing such tariffs from the get-go or put some in place as soon as possible. Those suppliers that fail to match the shifting market will be left behind and struggle to snap up customers as a result.

Also read: Energy Billing – How does it work?

What are the benefits to consumers?

With the UK government’s drive towards encouraging the population to adopt electric vehicles and other eco friendly measures in what it calls it’s ‘Green revolution’ consumers are demanding tariffs that better match their lifestyle.

So far, few smaller and medium sized energy suppliers have introduced tariffs that appeal to this growing market, instead it is the larger and innovative suppliers like Octopus Energy, British Gas and Bulb that has so far dominated this area.

The major benefits to the consumers from time of use and smart meter tariffs is their ability to allow them to better control their energy usage. The rise of Evs and the proposed replacement of all gas boilers in new builds with electric heat pumps will see consumers relying on electricity more than ever and without the ability to see exactly how much they’re using their electric; energy bills are likely to soar.

Also read: Green Energy Tariffs rise in importance for consumers, cost of energy bills remains top concern

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