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UK could save money by paying us to use less energy

Britain is on the verge of an energy crunch.  Without significantly higher energy prices the infrastructure needed to keep the lights on will never be built.  But even at todays’ prices, businesses are closing, the wealthy are going off grid, and the precariat are disconnecting themselves.

Unless you happen to have several thousand pounds lying around to install a rooftop solar system, there is little you can do about expensive energy other than simply not using it.  This is no bad thing in terms of carbon emissions, but it effectively leaves the poor without access to heating, cooking and cleaning; while an increasingly squeezed middle picks up the tab.

It could all be very different in future according to research by Open Energi reported in the Financial Times.  According to the research, having energy companies pay consumers not to use energy or to shift the times of day when they do so will cost better than half as much of the cost of building new gas-fired power stations:

“Building gas power — which the government has identified as its preferred way of meeting peak demand — costs about £700,000 per megawatt of capacity. In comparison, companies such as Open Energi say they are able to get users to switch their demand at an average cost of £350,000 per MW. The difference between the two could see the UK save £1bn.

“Open Energi also calculated this would save 1,560 tonnes of carbon dioxide on an average winter weekday, helping Britain meet its climate targets.”

This would involve extending the current practice of paying large users to switch off at peak times to ordinary householders and small businesses.  Low-income consumers could clearly benefit if they were compensated for changing their consumption patterns, while the squeezed middle would also see a reduction in their bills.

There is, however, a rather large fly in the ointment – the Open Energi research assumes that the energy companies will have finished installing smart meters by 2020, and that early adopters will have already begun to install smart electrical goods that can be remotely switched off.  The government has set a target of installing 53 million smart meters by 2020… so far the energy companies have installed just 2 million. Without the smart meters, manufacturers have no incentive even to begin building smart electrical goods and we have no incentive to demand them.

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