Cost of living: Three tips to save money on energy bills

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National Grid will hand households £3 per kilowatt hour instead of the originally planned 52p if they avoid activities that use up high amounts of electricity, such as cooking or using the washing machine, during periods of high demand in peak hours. The scheme, drawn up by National Grid ESO, is aimed at alleviating pressure on the UK power grids this winter as fears of a potential energy shortage continue to grow. Russia has already slashed gas deliveries to Europe travelling through major pipelines, but the Kremlin has issued fresh warnings, claiming it will not hesitate to make the continent “freeze” this winter. 

Making matters worse, while energy prices have soared as a result of Russia’s war in Ukraine, France’s nuclear output has plummeted due to issues with ageing reactors, posing a further threat of shortages in Europe, which could have a huge knock-on impact on the UK.

Industry leaders have been scrambling to avoid planned blackouts, which could come about under a worst-case scenario if supplies run scarce. 

To help swerve this outcome, National Grid reportedly wants to turn homes into “individual power plants”.  National Grid ESO director Fintan Slye wrote in the Guardian on Thursday: “Businesses and homes can become virtual power plants and, crucially, get paid like one too.

“For a consumer that could mean a typical household could save approximately £100, and industrial and commercial businesses with larger energy usage could save multiples of this.

“We are working with Ofgem to get this scheme launched in November and for it to be rolled out through energy suppliers. If you are interested in participating or understanding what you could get paid, please contact your energy supplier.”

National Grid is aiming to launch the scheme in November, which will only be available to UK households if they have smart meters installed. These are the new generation of energy meters which suppliers are rolling out as part of a Government programme to replace older meters.

Currently, there are about 14 million households with electricity smart meters in Britain. For these homes, they will be offered cash for limiting consumption during the hours (peak times) between 5pm and 8pm – when most people have finished work and it starts getting dark.

The move comes after Octopus Energy and E.On said the 52p payment was too low to incentivise customers to sign up for the scheme. Octopus is set to take part in the discount scheme after a trial was completed earlier this year, with Ovo Energy also reportedly considering joining.

During the trial, Octopus added credit to the energy accounts of customers that took part, and also provided a “self-refund option” where people could get a refund sent straight into their bank account for cutting peak-time energy use.

Over 100,000 of Octopus’ smart meter customers signed up and the participants were required to reduce their consumption on average by 0.7kWh, but the average saving for households per trial window (February to March) was only £0.23. Octopus claims households could save around £100 by taking part in its new programme.

Despite the original critique, the firm has announced its new “Saving Sessions” scheme, which allows Octopus’ 1.4 million smart meter customers and around 5,000 of its business customers to reduce their usage during times of peak demand in return for cash.

Under National Grid ESO’s winter scheme, all energy suppliers will have the option to financially reward their customers who reduce their electricity usage in peak times, and it appears Octopus took that offer up.  

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Octopus Energy CEO Greg Jackson said:  “Let’s be very clear: this is a historic moment – we’re entering a new era of energy in which households are moving from passive off-takers to active enablers of a smarter, greener and cheaper grid.

“Instead of cutting off whole chunks of the country if we are short of gas, we can reward people for using less energy at times of peak demand. We were the first energy supplier to offer this service to our customers, and we hope others will follow our lead. By doing so, we can make blackouts a thing of the past, and bring costs down for everyone.”

This also comes as Britons now face eye-watering bills of over £4,347 after April, analysts say, following Chancellor Jeremy Hunt’s scaling back of the energy price guarantee. As one of her first acts as Prime Minister, who announced her resignation on Wednesday, unveiled a scheme that would freeze bills for the typical household at £2,500 for the next two years. 

But Mr Hunt, who now appears to be in the driving seat, has said that the support will end in six months’ time, with more targeted measures to follow. The Chancellor said there will be a “Treasury-led review” in April after the energy price guarantee scheme ends, claiming it would cost the taxpayer “significantly less than planned whilst ensuring enough support for those in need”.

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