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Pricing energy like mobile phone data to drive efficiency

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Right now, in an attempt to try and move to a low- or even zero-carbon economy, the UK is busy pursuing a strategy of cutting coal use in power generation whilst installing heavily subsidised renewables (like wind and solar) and promoting a switch to electric vehicles. But it may not work.

Why?

Well, in part because a country with a population the size of ours – and with a mature economy that still encompasses a lot of manufacturing and engineering – requires vast amounts of affordable and, importantly, continuous supplies of power. It’s hard to see renewables alone filling the gap that will be left by coal not least because of problems with variable and intermittent output – especially if the move to electric vehicles gathers pace because it will increase load on the grid.

And so we need to do something else at the same time, and that’s limit demand for energy. The problem is that beyond installing energy efficiency measures, like LED lighting and home insulation, it really requires a fundamental shift in our relationship with energy and our behaviours.

Limiting and even reducing demand would mean that the challenge for renewables would shrink.

But changing behaviours is difficult.

People will still leave the lights on when they walk out of a room in the home that they’re not going to return to immediately. The central heating will, in a lot of homes, still be working in late spring even though outside temperatures have increased sufficiently enough not to need it. We enjoy the access we have to energy and we’re not as thrift with it as we should be.

There are lots of different ways to achieve the changes needed. For a start, we could educate people about it better – the ‘Recycle Now’ multi-media advertising campaign of the early 2000s was widely credited with helping to trigger a big upswing in recycling rates, so why not repeat that but to encourage people to use less energy? It could be done quickly and for a fraction of the costs of renewables subsidies.

Then there’s smart metering, smart grids and the Internet of Things (IoT) which will allow us to harness the power of technology in order to regulate energy consumption, for instance by remotely by switching off energy consuming devices when they’re not in use. But that will take a lot of time and cost a lot of money – we need change now, at the lowest possible cost.

So here’s a thought: why not sell home energy tariffs like mobile phone tariffs?

Those of us with smart phones (over 60% of us in 2013, and probably many more by now) will have all probably experienced the irritation of not being able to access the Internet and emails on-the-go because we’ve used up our mobile data allowance for that month. Or the pain of burning through our ‘free’ call allowance and finding that we’ve been punitively charged for the excess calls we’ve made.

The thing is, I bet that if you ask the majority of smart phone users that have had these experiences whether they altered their usage patterns as a result, the majority will likely say they did.

So, apply that logic to home energy tariffs. Based on historic consumption patterns, it should be possible to establish a UK-wide monthly average that is applied uniformly as a cap. Below that, the kWh price of electricity remains affordable – beyond it, and the price escalates to a level that will make homeowners think twice about overdoing it again next month.

Individual customers, that believe they can curb their consumption even further, could volunteer for an even lower cap at a discounted price, but where the penalty of exceeding their self-imposed cap is a significantly higher unit rate price for excess power consumed that month.

There are countless examples of price plans being used to successfully encourage or discourage certain behaviours. From Ryanair and the way it prices hand luggage to car insurance policy excesses (people that opt for a higher policy excess in return for lower premiums will doubtless drive more carefully in order to avoid a costly insurance claim), lots of industries and businesses operate schemes like this.

So why not energy?

Perhaps it’s something for Ecotricity and Good Energy to take the lead with…

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