Dynamic pricing

Dynamic pricing is a revolutionary way of paying for electricity that reflects its true market cost at any given moment. Unlike traditional tariffs with a fixed price per unit, dynamic tariffs change their rates every 30 minutes, mirroring the UK’s wholesale energy market.

How dynamic pricing works

In the UK, electricity is traded in 30-minute intervals. The price is determined by the balance of supply and demand:

  • Low prices (Off-peak): Usually overnight (2am-5am) or during very windy or sunny afternoons when renewable supply is high and demand is low.
  • High prices (Peak): Usually between 4pm and 7pm when everyone comes home, starts cooking, and turns on lights.
  • Negative prices: Occasionally, the grid has so much renewable power that it cannot be stored or used. In these cases, wholesale prices go negative, and some dynamic tariffs will actually pay you to use electricity.

Benefits of dynamic tariffs

  1. Lowest possible costs: For users who can shift their energy usage (e.g., EV charging or washing machines), dynamic tariffs are consistently the cheapest way to buy energy.
  2. Reward for flexibility: You are paid for helping the grid balance itself.
  3. Real-time feedback: Dynamic pricing encourages you to be more aware of your energy usage and the state of the national grid.

Risks and considerations

Dynamic pricing is not for everyone. It requires:

  • A Smart Meter: Essential for tracking half-hourly usage.
  • Flexibility: If you must use a lot of electricity during the 4pm-7pm peak (e.g., you have a large family and cook a big meal every evening), a dynamic tariff may be more expensive than a fixed one.
  • Automation: To get the best results, you should use smart controls to automatically turn appliances on when prices drop.
  • Octopus Agile: The most well-known dynamic tariff in the UK. It provides 48 half-hourly prices every day, capped at a maximum “Plunge” price for peace of mind.

The “Plunge” Price: Some dynamic tariffs include a “Price Cap” to protect you from extreme wholesale price spikes. Always check the terms of your tariff to see the maximum possible price per kWh.

Is dynamic pricing right for you?

Consider a dynamic tariff if:

  • You have an Electric Vehicle with a smart charger.
  • You have a Home Battery that can be scheduled to charge when prices are low.
  • You are willing to use Smart Plugs or automation for your dishwasher and washing machine.
  • You enjoy tracking data and optimizing your home’s performance.