Dynamic pricing trials

SAVE’s dynamic pricing trials looked to understand the capabilities for price signals to create habitual changes in the way/time in which households use their electricity. Typically, this is achieved through a daily price signal (though signals may be less frequent i.e. weekly) highlighting time periods where energy is more or less costly to consume. A commonly known form of dynamic pricing is the time-of-use (ToU) tariff which provides consumers a stimulus by varying the cost of electricity at different bands throughout the day.

ToU tariffs and DNO led variances on this have been tested through a number of other innovation projects such as Low Carbon London and Customer Led Network Revolution. As a result of this learning the SAVE project team designed a new form of dynamic signal: peak banded pricing. This signal was explored following industry consultation as a mechanism which may be simpler for customers to understand/react to and relevant to potential future charging arrangements DNOs or suppliers may look to encourage. A peak banded tariff looks to set customers a bespoke target based upon their predicted electricity usage. For every half hour customers stayed below their target they would receive an incentive payment, when consumers did not reach their target the incentive was foregone.

SDRC 8.4/8.7 Data informed engagement and price signals trial report

The SAVE project tested the use of banded pricing with the different participant groups.

Dynamic Pricing overview
The project sought to explore a dynamic pricing strategy with participants. The strategy developed by the project, termed ‘peak banded pricing’ looked at setting customers consumption targets with rewards for reaching and sustaining their reduction goal. 2000 of SAVE’s participants were rolled into the peak banded pricing trials and split between and opt-in and an opt-out trial group. Of those in the opt-in trial 38% participated, of the opt-out group 98% participated. The project trials ran over 12 weeks from the start of October 2018 and in week 6 offered an increase in hourly price from 10p to 30p per unit, the results of this can be seen below.