44: Shifting and flexing home energy demand
How can we shift our demand for energy in the home, perhaps by shaping and flexing our domestic routines to match periods of peak 'clean' energy production?
Does our relationship with technology have to change in order to reduce demand and therefore cut emissions?
This episode continues our focus on the role of demand in delivering net zero - specifically focusing on one key area of energy consumption - in our homes.
Joining Matt and Becky this time are:
Sarah Darby, Associate Professor in the Environmental Change Institute at the University of Oxford, and Phil Steele, Future Technologies Evangelist (what a title!) at Octopus Energy.
Essential Reading: https://www.sciencedirect.com/science/article/pii/S2214629621003698?via%3Dihub
https://www.newcomersh2020.eu/upload/files/Energy%20Local_Research%20Brief.pdf
Episode Transcript:
[Music flourish]
‘We’re able to use that Powerwall battery to soak up cheap wholesale energy overnight and cheap periods through the day when the wind is high and early mornings and also export extra energy back out to the grid from the Powerwall.’
‘Heating can be trickier. We’re very used to having very quick and easy control of our heating via a thermostat and making a shift to heat pumps is a different way of thinking about heating and it operates in a different sort of way.’
Rebecca: Hello and welcome to Local Zero with Becky and Matt.
[Music flourish]
If you caught our last episode, you’ll have heard us talking about the importance of demand when it comes to delivering net zero or, in other words, how our behaviour impacts our demand and, therefore, the supply of energy.
Matt: Yeah, so this week, we’re going to take a closer look at energy use in the home. We’ve got two great guests with us this week to chat about all things energy demand and joining us today is Sarah Darby, Associate Professor in the Environmental Change Institute at the University of Oxford. We’re also joined by Phil Steele, Future Technologies Evangelist at Octopus Energy.
Rebecca: What an amazing title that is.
[Music flourish]
And remember, do get in touch with us on Twitter if you want to reach out and talk to us about anything about the show or share any thoughts you’ve got. If you haven’t already, do find and follow us @LocalZeroPod to get involved with the discussions there. We’d also love to hear from you by email as well, so send any longer thoughts you have to LocalZeroPod@gmail.com.
Matt: Thanks to those of you who have emailed feedback, much of it positive. For instance, Chris Kimber, thank you to you. He emailed us the other day saying, ‘I’m a regular listener and I just wanted to say the recent episode on energy demand with Lorraine and Nick was excellent. Probably, in my opinion, the best yet.’
Rebecca: Yeah, and while we’re talking about that last episode, thank you to Victoria Penman too. She tweeted us to say, ‘Excellent listening. Today’s favourite takeaway is that it’s okay to dial up and dial down your individual effort and that we don’t have to be perfect all the time.’ Thanks to Victoria for that and, yes, I am certainly not perfect all the time [laughter]. A very, very good point to think about.
[Music flourish]
So, Matt, we’re Fraserless this week.
Matt: We are.
Rebecca: Just the two of us again.
Matt: I feel like I’ve lost my right arm, yeah. We are without our anchor. No, Fraser is busy. I say busy but he’s on leave, so a well-earned break after a busy few weeks. We’ve got an absolute cracker of an episode lined up and it’s one that is close to your heart, Becky, and one that you’ve tangled with and we’ve spoken about in previous episodes which is about shifting your energy demand and to do so for some kind of reward. For those who maybe haven’t listened to the previous episodes, is it worth us bringing people up to speed? How was it for you? What did you do? Was it worthwhile? [Laughter]
Rebecca: Absolutely and I think if you haven’t, do listen to the episode that we just released with Nick Eyre and Lorraine Whitmarsh. Absolutely amazing talking about the concept of energy demand more broadly and why energy demand is so important for the net-zero future. Today’s episode is about one very focused element around energy demand and, as you say, Matt, something that is very close to my heart after I signed up to participate in the Octupus Demand Response Trial earlier in the year.
Matt: An Octopus guinea pig.
Rebecca: A guinea pig, yeah. I’m not sure how I feel about being a guinea pig. No, it was really interesting for me. Octopus Energy had this very interesting trial where they offered customers – I think you probably had to have something to qualify like being on a smart meter or so on and if you opted into the trial, we were told about a day in advance or sometimes a bit more, about when the electricity grid was going to be dirty; so when they were expecting fewer renewables to be on the grid or maybe more demand resulting in that energy coming from dirtier sources. During that time period, usually about two hours, you had to reduce your energy consumption and if you reduced by a certain amount... for the life of me now... this is how long ago this trial was [laughter].
Matt: It was a lot.
Rebecca: Maybe it’s just my brain. It was quite a lot. If you reduced by that amount, you got this reward of getting your energy from that time period free. I have to say I think there were five or six different events, so different days on which we had to do this. I was only successful on one of those days. It was really, really hard [laughter].
Matt: Still, big gold star because it’s not easy [laughter]. I should say that Octopus isn’t the only company driving this. On their Agile tariff, I do know that there are rewards also for consuming energy at the right times. On their Agile tariff, energy prices will be lowest at times of greatest surplus and lowest demand, so you’ll get it cheap. Also, they will actually do plunge pricing where they will pay you money to consume power.
Rebecca: Wow!
Matt: Can you believe that? In this day and age, in an energy crisis with bills about to hit £2,800 a year and you’re paid to consume power.
Rebecca: But this is it, Matt, isn’t it? This is how things are going to shift as we start to see more renewables coming online because when the wind is blowing, when the sun is shining and when demand is low, we have a surplus of electricity and we do not have the storage to be able to store all of that in batteries somewhere to be able to use it later. So we are moving from a world where demand is higher and so we say, ‘Throw a bit more coal into the power station,’ to a world in which we need to think much more about how we’re using energy and how that’s lining up with when that energy is being generated. I can see what’s happening but here’s the thing. I found it so hard to shift my consumption and I work in this field. I know what I should be doing. I know a lot of these things. One of the days when we were successful, we reduced our demand by 80% and I have absolutely no idea what we did to get to that. On the other days when we weren’t successful, it wasn’t like we weren’t trying. We were trying but we just obviously didn’t hit the nail on the head.
Matt: Or your routine didn’t allow for it.
Rebecca: Exactly. So it’s very hard to understand what it is that I needed to do and moving forward, if we see more tariffs like this, what it is that people need to do to actually create that change.
Matt: Not all demand is alike. Just before the episode that we’re recording now, we were talking and if we’re talking about electricity consumption here, there are some types that are much more flexible than others. Charging your EV is pretty flexible and also not as maybe routinised if you’ve got a 12-hour window to charge it at home and I know not everybody has a home charger. If we were talking about taking a shower, that is pretty flexible if you think about it. You’ve still got the same window but it’s highly routinised. You get up in the morning, it’s part of your routine and you hop in the shower or you do it in the evening. So I think there’s also the perception of what is flexible demand and what isn’t. Also when you’re looking at the total amount of power that these behaviours consume, an electric shower is actually pretty energy-hungry but charging your EV, if it’s a 60-kilowatt-hour battery, that’s a huge chunk. If you can chuck that to the early hours of the morning versus at 6 o’clock when everybody has got their dinner on the go, that’s a big win and I know it’s something that Octopus is really, really keen to crack.
Rebecca: You bring up a really interesting point there with the shower, Matt. Let’s take gas out of the equation for a minute but part and parcel of moving from instant power for those instant electric showers to having a heat pump heat up a water tank because if you have that hot water tank, you actually can heat it up outside of those hours. It could be heated at night, it could stay hot and you could then take your shower when you wanted to and use the water that’s already been heated at the optimal time. This, for me, is where it really gets into some of the nitty gritty of the challenges here. Let’s look at the technologies that are going to be required to allow you to take advantage of these tariffs and just who is going to be able to do that. To me, it feels like these are potentially tariffs that might, on the surface, seem like they’re open to everyone but actually, when it comes down to it, only certain people may be able to really take advantage of them.
Matt: Well, we’ll get into that I’m sure. I think there’s this kind of Goldilocks question of what’s the perfect blend of needing to adapt to your demand or needing the technological software and business-model innovations to enable you to not have to change your demand. If you live in an average house but you’re on a Time-of-Use tariff where it’s cheaper at night, the time to shower is between 11.30 pm at night and 04.00 am in the morning, give or take [laughter]. So unless you set your alarm, it isn’t going to happen.
Rebecca: No.
Matt: Whereas, if you’ve got some storage device, whether that’s electricity like battery storage or, as you say, hot water storage or some other vector where you can store that power, energy or heat, you can have your shower in the morning or in the evening whenever you like. That’s not to say that tech is always the fix. We are still going to have to change how we do things and that’s the big question. What behaviours do we need to change and why? What stuff can stay the same? Can we still eat dinner at 6.30 pm with the kids? [Laughter] I’d like to because I get very hungry [laughter].
Rebecca: Me too, me too. Actually, that was a really hard one for me and, in fact, I have a horrible feeling that the day that I was successful in reducing my electricity demand was because I cooked on gas rather than using the oven.
Matt: I thought you were going to say it was because nobody ate dinner [laughter]...
Rebecca: I starved the children [laughter].
Matt: ...but I’m glad you still served up. That’s good.
[Music flourish]
Rebecca: Well, I think it’s probably time to bring our guests in and actually put them under the spotlight and find out a little bit more about what we can all do and how to drive things forward. Let’s bring them in.
Matt: Absolutely, yeah.
Phil: My name is Philip Steele. I am the Future Technologies Evangelist at Octopus Energy. That effectively means a global R&D role. I look at a lot of innovation and experimentation and what we do with new tariffs, what sort of tech is going on and how the industry is changing.
Sarah: I’m Sarah Darby and for many years now, I’ve been researching at the Environmental Change Institute at Oxford into energy demand. I guess my interest in demand response dates back to when I started being part of the evaluation team for the smart meter rollout for this country. Since then, I’ve been taking a keen interest in smart energy development, particularly how they look from the customer end.
[Music flourish]
Matt: Welcome both and it’s absolutely fantastic to have you here. Again, this links into the last episode we ran which was looking much more at the broader concept of energy demand and how things are evolving. We’re looking specifically today around how we can start to change the timing and type of our energy demand in particular, not only to tackle the climate crisis but obviously, the energy crisis which is hitting everybody’s pockets. I just wanted to begin to set the scene, Sarah, if we may, about explaining what energy demand in the home looks like and how this has evolved over the last few years, if at all.
Sarah: Well, for most of us, energy demand in the home is about heating and water heating more than anything else; so the space heating may be 60% of the energy demand and the water heating another 15% or so. There’s then all the electrical kit that we use and the lighting on top of that.
Matt: Absolutely. That’s the breakdown. Have we seen those shares change? Maybe the absolute share and total energy that we consume have remained broadly constant but have we seen changes in the patterns of that energy use?
Sarah: House electrical appliances have been getting more efficient and so the use per appliance, particularly with LED use for lighting, has gone down. On the other hand, quite often, we’re buying more of these and we have more on standby and so those two things can balance each other out a bit. For heating, the demand has also tended to fall in newer buildings which are built to higher efficiency standards and it’s fallen when people have insulated their homes. Overall, we have actually seen domestic energy demand fall since 2005 for both gas and electricity.
Matt: Phil, Octopus will be all over this. You’ll have data coming out of your ears, particularly of customers that you have on the books. Octopus is still a relatively new company in the grand scheme of things but even in the relatively short period of time you’ve been around, have you seen changes in the way that your customers are consuming energy and even other customers more broadly?
Phil: Yes. We’ve been around since 2016 and so we are still a new company but we do have a lot of data that we’re gathering because, from smart meters, we get the half-hour data and we bill customers on some of the smart tariffs like Agile, Go, Intelligent Octopus, Go Faster, Tesla tariff and so on. You could go back and look at LED bulbs. You take a 40-watt incandescent bulb and we’re down to about 4 watts or a 100-watt lightbulb and it’s 7 or 8-watt equivalent. So that’s certainly changed. That change probably happened quite a few years ago and most people are now on to the energy-saving bulb but the change that’s happening is actually with electric vehicles and as we move to heat pumps as well. You can see that energy consumption has dropped over the last few years. It’s been a smallish decline and not a huge decline but actually, the estimates are that we are going to double our electricity consumption over the next few years running up to 2050 because of electric vehicles and the electrification of heat. Anecdotally, my home might not be the best representative and Sarah mentioned that you do need really well-insulated homes and that’s the other change on this but our home is poorly insulated. We put an air-source heat pump in and our electricity has quadrupled, although we have an EV and so a quarter of that may be the electric car. I’ve not done the breakdown to be able to break out that difference of the electric vehicle on it but our electricity has quadrupled, however, we’re off gas. We have no gas meter and no gas consumption anymore for the heating and hot water.
Matt: Of course, you’ve got to fold in the diesel or petrol consumption that you would normally have with your car which may have been accounted for slightly differently and now many of us are adding that on to our electricity. In fact, I’ve just had my folks up for the weekend and they charged their car and I looked at my smart meter and thought, ‘Oooh! That’s a lot of money.’ [Laughter] That’s kind of moved from the petrol forecourt to my house.
Phil: It might still be a tenth of the cost to fuel that vehicle.
Matt: Absolutely.
Rebecca: What’s really starting to interest me, and I’ve heard this mentioned a few times just in this short chat so far, is the concept of energy efficiency and the need for our homes to be more efficient to enable the electrification but also the fact that efficiency has a big impact on our total demand. Before the two of you joined us, Matt and I were just having a chat about our energy use and one of the things we started talking about was that it’s not just about efficiency anymore. It’s also about when you’re using energy; so using a certain amount of energy at 7 or 8 o’clock in the morning is not necessarily the same as using that energy in the middle of the night or in the middle of the day because, with decarbonisation, more solar panels and more wind turbines, we’re starting to see very, very different sorts of ways in which our energy system is operating. This is really fascinating to me. Energy efficiency in the home is one thing but with energy efficiency, once you start to think about the whole system in the whole of the UK, that starts to bring in a very different dynamic to the conversation. Phil, you just mentioned a few of Octopus’ different tariffs. Gosh, I couldn’t get my head around all of them but I’m assuming that they’re all different because they’re all offering some sort of price differential at different times of the day. How important is that, as a company, to be really thinking about when your customers are using their energy?
Phil: Actually, the beginning of those tariffs was to try and engage consumers in how energy is generated, when it’s generated, how we consume it and to encourage things like the uptake of electric vehicles. The Go tariff was one of the first. It’s a bit like an Economy 7 tariff which has been around for decades. It’s got a very low price and it’s currently 7.5 pence between 12.30 am and 04.30 am and is perfect for charging an electric car and then it’s a flat rate through the rest of the day which is similar to our flat-rate tariffs and so on. That is saying to customers that the cost of energy on the grid is much lower overnight and so let’s use that to charge up electric cars. There’s less demand. Customers lapped it up and it’s an extremely popular tariff. The Agile tariff kind of takes it to the other extreme and tracks the wholesale market every half-hour of the day and is repriced every day. At 4 pm this afternoon, the wholesale market will set what the wholesale rates are for each half-hour for tomorrow and we publish those as the Agile tariff tonight at 4 pm for tomorrow’s 48 half-hour time periods. That varies and it can be from 10-12 pence up to its cap of 35 pence. Customers on that tariff are then either looking at the published data, so 48 price points for the next day and saying, ‘I’m going to charge the car then. I’m going to use the dishwasher then. I’ll use the washing machine then,’ or they connect stuff up with the API and automate stuff off that tariff. A word of warning for anybody that’s listening: depending on what month or year you’re listening to this, the wholesale market has been high since September 2021 through to now in June 2022 and so we’re often reaching that 35 pence cap more half hours through the day than we would really like but that’s just a reflection of what the wholesale market is doing.
Matt: Sarah, a lot of what Octopus is doing and what Phil has just outlined there is predicated on the idea that people can shift their energy demand, particularly electricity demand, Phil, I might add. As we start to electrify other types of energy demand, and Sarah pointed out that once space and water heating become electrified, we are really talking about electricity. Sarah, from your years of research on this, how easy is that? Are some behaviours easier to shift or some demands easier to shift than others?
Sarah: Certainly, if we had an electric vehicle, we’d be on a tariff like the Octopus one which really seems like a no-brainer that you’d charge your car in the middle of the night. Of course, you’d want to do that and it’s an easy one to do. In fact, we don’t have a car now and we joined a car club instead [laughter] but if we had, we’d do that. Heating can be trickier. Most of us are very used to having very quick and easy control of our heating via a thermostat with gas central heating and making a shift to heat pumps is a different way of thinking about heating and it operates in a different sort of way. There you have quite a bit of challenge, I think, in getting people used to the idea that a heat pump will work better if you have it on steadily all the time and arranging that, particularly for a lot of people, at night time so that they’re not too hot. What you really, really don’t want is an enormous surge of demand on the grid early in the morning as people are getting up which is what we see with gas at the moment. So handling that is going to be quite tricky. If your heat pump is noisy, as some of them unfortunately are for some people, then having that on overnight may be a bit of a problem too. So there’s quite an adjustment to do there I think. With hot water, managing that and timing that ought to be fairly manageable. Washing machines are a nice easy one. We got a new machine recently and I can set that so it goes on in the middle of the night. Some things are very inflexible. If you want to watch the television, you probably want to watch it now and you’re not going to defer that because of the price of electricity [laughter]. If you’re hungry, then you want to cook now and, again, you’re not going to wait, so those are harder.
Matt: Phil, is this something that has been borne out by your own experiences in customer research or are you seeing something different?
Phil: No, it’s true. The heat pump will consume, say, 1.5-2 kilowatt-hours of energy at a time. This is where, with a heat pump, you do need to look at the insulation because you’re running a heat pump at a lower temperature than you would with a gas boiler. Typically, the water flowing through the radiators is around 40-450 versus 55-600 with a gas boiler. With a heat pump, sometimes the radiators need to be increased. You’ve got a larger surface area to emit the equivalent of heat energy out of them and, therefore, a heat pump will warm a home slower than a gas combi boiler would and, therefore, if the insulation is poor, then you may not be able to keep up with the loss of heat when having a heat pump. Heat pump installation will always start off with a thorough survey of the insulation, the thermal requirements of the rooms, the thermal output of the radiators and so on. With a super-insulated home, you are going to be able to get some flexibility from a heat pump and so try to avoid too much energy consumption in that first morning period and again, in the 4 pm till 7 pm peak period in the evening as well. The heat pump will also manage the hot water as well. The heat pump can increase its output temperature to 550 or so to fill a hot water tank. That is probably more efficient. Certainly, it is more efficient than an electric emersion heater and you can set a schedule. You warm that hot water tank overnight just as you would with charging an electric car. I actually started to refer to a heat pump not as a consumer device but as a generator device. It’s generating energy. It’s energy generation. You’re consuming that 1.5-2 kilowatts but actually, the output is three to four times that and so you’re actually producing energy in your home. That’s why it’s more efficient to use a heat pump to heat the hot water than an electric emersion element in a hot water tank.
Rebecca: It’s really fascinating hearing you both talk about the switch to heat pumps because we know that this is something that’s got to be done to meet net zero. I was actually just reflecting back on my days when I lived in New Zealand. When I first moved there, the heat source that I had was a wood-burning stove and that was it. That was the only heat in the home and there was no insulation. We got used to a home that was either really, really hot because we couldn’t tune the temperature or freezing. Eventually, we lived in a home with a heat pump but the heat pump that I had was one of those ones that are just stuck on the wall and just blows out hot air [laughter]. Very different to the conversation we’re having now. What I find fascinating is that we often talk about this as if it’s about changing technology or changing behaviour and what I’m hearing is that it’s not just about changing the technology because you need the behaviour change to go hand-in-hand with that. There’s an education component. If people get a heat pump but then try and use it in the same way that they’ve been typically using their heating, it’s not going to be as effective. Sarah, you’ve done some particular projects. In the Oxfordshire project, you’re doing this but I know there’s been a whole lot of work that Oxford University has been involved in where people are switching to these very new sorts of technologies. Do people find it easy to adapt to them? Is it quite a big educational component? Are people challenged with the shift in behaviour or is it something that comes fairly naturally to them?
Sarah: I think there is quite a big educational component to make it work well. The project where I had the most to do with that was actually not heat pumps but smart storage heaters. They’re a kind of step along the road towards heat pumps you might say. There we found the role of the installers was really, really important and that they would tell the customer what was going to happen before installation, at installation and also a visit two or three weeks afterwards and asking, ‘How are you getting on? How is it working for you?’ Some advice there was really important in helping it work for the system as well as for the customer. We’re now finding that in Oxfordshire with installing heat pumps again. Training installers to be good communicators is really important and also, people like housing managers, for example, if they’re putting heat pumps in social housing, they know the ropes and know what sort of changes are needed, can help guide people through that and do it over a period of time. That seems really important.
Rebecca: Yeah, absolutely and I guess this kind of goes hand-in-hand with then being able to tap into the advantages of these innovative tariffs. I do want to touch back on this tariff component. Anybody that’s listened to Local Zero in an ongoing capacity will have heard my excitement and then my downfalls as I took part in the Octopus Energy Demand Response Trial [laughter]. I was so excited to be invited to take part because after researching along these lines for so many years, I got the chance to look at it from the other side. That first email came into my inbox inviting me to the turn-down period the next day and, of course, I clicked ‘Yes, I’m opting in. I’m doing this,’ and then I drastically failed. I did not manage to reduce my demand [laughter]. I don’t know how much I failed by actually but I did. On the second attempt, I did manage to reduce my demand by something like a whopping 80% and to this day, I have no idea what I did to make that work the second time or to mean that it failed the first time [laughter]. I should say that I failed on every other occasion that I tried. The success was the outlier for sure. Phil, how did that trial go? Presumably, you’ve got some of the results now. Did you find that, on the whole, people struggled to do it or were there positive responses?
Phil: It’s really interesting to hear about your experience there about being able to identify if you were reaching the target or not because that was some of the feedback. Actually, some of the feedback as well was that as we were giving a credit that was calculated according to what your energy consumption was, actually, the more you saved, the less credit you got which is a kind of perverse way of doing it. The average saving was only something like 50 pence or so. That was the credit that we were giving customers.
Rebecca: Yeah, I think mine was 20 pence [laughter].
Phil: It wasn’t about the monetary value. It was about taking part in it. I’m looking at the May 2020 version that we did. I’ve got some of the statistics here. There were 50,000 customers that took part in that. There was an additional 71 megawatt-hours of electricity consumed over the two bank holiday Mondays in May 2020 and so that was a 200% increase on the forecast. It was a change that we made there where the grid actually wanted to curtail excess wind generation on those two events. It just shows that tens of thousands of customers will take up these sorts of things even if their impact is very small. In aggregate, it’s a really large impact.
Matt: I think that kind of begs the question, Phil, from your perspective and Octopus’ perspective more broadly, where does this lead us? Where are the limitations around Time-of-Use tariffs? I remember Becky in past episodes saying, ‘Actually, the 20-pence reward I got was infuriating. If I’d have got nothing, I’d have probably felt better about it.’ [Laughter]
Rebecca: It’s true [laughter].
Matt: Even just a gold star or a virtual pat on the back.
Rebecca: Oh, I would have liked a gold star or a pink octopus. I’ll take one of those pink octopuses [laughter].
Matt: A pink octopus. There you go. The point is how far do these monetary incentives around shifting our demand get us? Where do we hit a brick wall and what’s the next step for yourselves?
Phil: You can look at some of the other tariffs that we’ve got. The Tesla tariff is a good example because you’ve either got that Go or Agile tariff where you’re trying to watch what the tariff is doing or we take control of things and you don’t worry about it because the rate that you’re going to pay is the same all the way through. The Tesla tariff is running at about 11 or 12 pence per kilowatt-hour on the import side and because it’s connected to the Tesla Powerwall, it also pays 11 to 12 pence on the export side. I say 11 to 12 pence because it varies according to the GSP (Grid Supply Point) regions across the country. It’s a regional tariff. That is obviously much lower than our current tariffs which are around about 25-28 pence and that is because between us and Tesla, we’re able to use that Powerwall battery to soak up cheap wholesale energy overnight and cheap periods through the day when the wind is high and early mornings and then also export extra energy back out to the grid from the Powerwall, particularly during the peak period of 4 pm to 7 pm or just simply supply the homes so it’s not drawing from the grid. That’s the full-managed service. The other tariff we’ve launched recently in the last six months is Intelligent Octopus and that one is connecting to the Tesla cars, a few other cars and EV chargers coming up as well. It’s got a similar Go-type tariff which is 7.5 pence for a six-hour time period overnight and the same flat rate for the rest of the day. As a customer, you say, ‘I need my car charged by 8 am to 70%,’ and then we take care of the rest. We’ve also done Powerloop where we discharge the car as well. As a much larger battery than a Powerwall, a car has got 30, 40 or 50 kilowatt-hour plus size battery; whereas, a Powerwall is typically 10 kilowatt-hours.
Matt: So that’s a vehicle to grid where you’re drawing in power to charge it but also pushing power out from that electric vehicle back into the grid.
Phil: That’s it, yeah.
Rebecca: But I want to touch on that first one you were talking about with the battery and this is where I get quite excited with my Local Zero hat on. The conversation we’ve been having so far has very much been focused on me and my home (not just me but anyone in their home and their household) and what you can do as an individual household. A lot of the power often in the transition we’re seeing towards net zero is around what people can do when they come together and we start to see households working together or communities working together. For a lot of communities, it might be that people don’t have these individual batteries but maybe they join together and they’ve got some sort of community asset or working together as a community, they achieve more. Sarah, I’m wondering if there are any sorts of reflections you’ve got here from the work that you’ve been doing in the Prospering From the Energy Revolution programme where I know you are seeing a lot more of this kind of community-level engagement and people working together to change things or to use their assets in different ways.
Sarah: Yeah, it’s a very interesting point. Certainly, anecdotally, our Local Network Operator had a call recently from a village in Oxfordshire saying, ‘We’re getting brownouts.’ The DNO hadn’t been aware of this because they didn’t have enough local visibility really of what was going on but it was because, in this small area on this substation, they’d recently installed a lot of heat pumps in the homes and so the pattern of demand had changed quite a lot and the pressures on that substation. It can be that, as a community, you’d need to pull together and manage your demand better just so that the system can cope locally without having to dig up the roads and put in a whole lot more wires to deal with a changing pattern of demand. On the other hand, if you get a locality where people put in a lot of solar PV, you get the opposite sort of issue with the pressure on the substations. We’re starting to have that sort of awareness now as well as, of course, the other sorts of things that bring people together as communities when they have environmental groups and then they start getting into energy and they want to do something collectively.
Matt: I mean there’s something in this, isn’t there? If you’re looking to balance the grid and maximise the efficacy of that grid and its cost-effectiveness, it’s easier to manage one unit of a thousand customers versus a thousand households or customers. Phil, it’s all well and good having a thousand customers on these dynamic tariffs and hoping to cajole, nudge and incentivise them in a certain way but have you thought about aggregating these and connecting them together so they act as a homogeneous group because that’s easier to manage in theory?
Phil: Yes, just one point on that with the DNO, there is a process with the DNOs called the G99 and G98 Notification Process. Whenever a heat pump is installed or a solar system is installed, the installers are supposed to notify the DNO so that they can check that the grid can cope with it and if they need any reinforcement or not. That process actually becomes mandatory for solar if somebody wants to get an export tariff from us because the DNO allocates the export MPAN which is the identity against which we credit for the energy that’s exported. The DNO should be aware that heat pump installs are going in and that solar is going in to be able to cope with those kinds of issues.
Matt: Phil, sorry, the acronym DNO means Distribution Network Operator. They’re the companies that manage our low-voltage networks.
Phil: That’s it. That’s the local cable connection. We start from the meter side of things.
Matt: That’s all about visibility on the network, right? To Sarah’s point, my response was about aggregating and managing the demand and generation but at present, my understanding of this is that these DNOs, these Distribution Network Operators, don’t really know a great deal about what’s on that network. They don’t have a great idea about what companies like you ought to be trying to manage.
Phil: No, there’s not much monitoring at the substation level or the feeder level, the individual wires that come out to run down the street. They are a little bit in the dark as to what the grid is doing. It’s just where those sorts of issues do occur. Going back to the point on aggregation, another smart tariff for you, Becky, is the Fan Club tariff. That’s one where we’ve looked at ways in which groups of consumers can benefit from local generation. There are only two wind turbines at the moment that have Fan Club’s set up.
Rebecca: I’ll tell you, the names! Do you have people in the company that are just there to create names and really, really good names for your tariffs? [Laughter]
Phil: Look him up.
Matt: What do you think the little, pink, fluffy octopus does? [Laughter]
Phil: There’s a chap called Peter Miller, who is one of the co-founders, and he comes up with all these names of products. He’s a genius on that side of things. It’s a brilliant name. It’s an inspired name for it. Customers who are members of the Fan Club... there’s one in South Wales and one in North Yorkshire and if they live within the postcode of those two wind turbines that we own, then they can see the almost real-time data, as it’s updated every 30 seconds, on an app that we’ve created. They can see how well that wind turbine is turning like the rotor speed, wind speed, kilowatts of generation that’s coming out of it and we even calculated, and show as a real-time metric, how fast you would be moving if you were sat on the tip of the wind turbine [laughter].
Rebecca: Brilliant. Can they see the wind turbine from where they are? Can they actually physically see it?
Phil: Yeah, some of them can. Some are hidden on the other side of the hill and so you can’t quite see them. Yes, often they can see them.
Matt: Phil, this goes back to Becky’s earlier point and I think the average customer thinks, ‘That’s all well and good. I don’t really understand it but it sounds good for me.’ It’s about converting system benefits and the system benefit here is if you’re consuming power locally to where it’s generated, there are fewer distribution losses. That means that there’s less power being lost in those pipes and wires and what Octopus is doing, very well in my opinion, is making that benefit tangible to the customer as it’s on their bill. Is that a fair synopsis?
Phil: Yes, but the grid doesn’t really allow for it from a billing point of view. We can’t buy that energy at a local rate. I liken it to the tube network. You buy a Zone 1 ticket or a Zone 6 ticket and there’s a different price but actually, there’s no difference in price for electricity generated from a wind turbine a mile away or from the nuclear power station 50 miles away. There’s no difference. The distribution and transportation costs are homogeneous and equal across the entire grid. We’re demonstrating that customers will engage in this sort of tariff and, at the same time, we can reduce the burden on the grid by doing it but it still needs to change in the way things are built for it to properly work.
Sarah: Phil, just a question I’d like to pop to you while we’re here. Is Octopus thinking about doing any direct-load control with heat pumps yet?
Phil: Yes, in our research centre in Slough, we are doing all sorts of research and investigation into what we can do with heat pumps and inventing technology there. In fact, if you look on Twitter, you’ll see one of the devices we launched recently is a CAD (Consumer Access Device). It’s the equivalent of an IHD (In-Home Display) but it streams the smart meter data every ten seconds up to our mobile app and so you can see in real-time what’s actually going in the home, whether it’s a 2-kilowatt load, 3-kilowatt load or whatever. I can see when the heat pump comes on and off and so on. One really interesting example is that I was working from home one afternoon and my wife was ironing the schoolchildren’s clothes for the next day. I was watching the data and I was getting these spikes of 3 kilowatts for about 15-20 seconds and then it would stop for 30 seconds and then I’d get another spike of 3 kilowatts for 20 seconds or so. I then realised, of course, what I was watching there with those spikes was the iron clicking on and off. When you do your ironing, you see the orange flickering on and it has a really high load like a kettle. It’s 2 or 3 kilowatts but it only lasts for about 10-15 seconds. Now if you look at half-hour data that we get from smart meters, you would never see that but when you see it in real-time and you see those spikes graphed out... because on IHD, you would still see the 3-kilowatt load but you would never see a graph.
Rebecca: You’re going to have to explain the acronym.
Phil: That’s the in-home display. That’s the device that all smart meter customers get today and it just has a basic little dial that shows you’re currently consuming 3 kilowatts or 1 kilowatt or whatever. You would see the dial move if you were watching it but when we graph that over, say, five minutes and you see those spikes every 30 seconds, then it’s much more real, tangible and easier to try and figure out what’s going on.
Rebecca: Matt, did you get one of those when you got your smart meter?
Matt: I’ve got my IHD [laughter]: my in-home display unit.
Phil: Is it powered up or is it in the drawer?
Rebecca: Is it prominently in the kitchen?
Matt: It’s behind a picture frame [laughter] on the bureau. I can see it but my wife can’t which is the key. It’s not an eyesore but it is imparting the information I require.
Phil: This is one of the next devices because you’ll get it in the app and you’ll get your data because that’s just like almost a file and forget. You see the data and it’s gone a moment later when it next updates.
Matt: That’s it. That’s the difference between a rev counter or speedometer on your car and actually charting that over time. They’re the same data but presented differently which imparts a completely different message. In fact, just as you’re saying that Phil, I’m checking my Octopus charge and I can tell you the moment my mum and dad were here and when they left because the EV charge just stops [laughter] – stops bleeding money basically [laughter].
Phil: That’s how we engage customers. It’s the data. It’s making that visible, presentable and making use and value out of it.
Rebecca: I think there’s something else in all of this and I’m going to reflect back, Sarah, to something that you wrote a very, very long time ago. It’s actually one of the things that inspired me with a lot of my work. This goes back to work on feedback and just the very nature of seeing and engaging with that. That’s why I asked if the customers can actually see the wind turbines. If it’s there in front of you, it has an impact on the decisions that you make and the way you actually engage with it. I think for many of us, energy has become very invisible. We flick the light switch on and it turns on. Certainly, living in Scotland now... when I moved from London to Glasgow, I became so much more aware of the generation side of things because everywhere I look, I see a wind turbine. Maybe that’s about where I live now. I’m looking out of my window and I can see just a lone wind turbine. There’s just one and it doesn’t always turn but I can see it and it really connects me to the concept of energy.
Matt: I mean I even know which one you’re talking about. That’s how connected it is. I actually know which one you’re talking about [laughter].
Rebecca: I know, I know [laughter]. So I’m just wondering is there something in all of this? It’s not just about the cost or the shift in the bill. There’s something inherently important here for people around that connection to energy, to the generation or to the locality.
Sarah: Yeah, I think there absolutely is. On the one hand, we’ve got more renewables about now and so when the sun shines on the panels on you or your neighbour’s roofs, you think, ‘Oh yes, they’ll be generating now.’ As you say, when the wind blows, you know what’s going on there. I think there’s that sort of awareness and also because of displays and because of more informative bills, I think it’s becoming less abstract and less taken for granted. Just recently, of course, with these big price hikes, a lot of people are having to think about their energy use in a way they’ve never had to before. It’s become really pressing.
[Music flourish]
Matt: Past performance is always a great indicator or it should be a great indicator of what the future might hold. We’ve gone through a number of quite disruptive periods around energy consumption, just to name the two biggest ones which are Covid and the energy crisis. You could also argue climate action and that growing agenda. Looking at the last 18 months, is there anything there about how the general population had to amend their energy consumption or change it, whether it’s about cost pressures due to the energy crisis or wider regulatory lifestyle impositions from Covid, that teaches us anything about what the next few years hold? Are we match-fit to start adapting our demand for net zero or do we need to focus less on the technology and market solutions and focus a little bit more on the people aspect of this?
Phil: That’s a really good question actually. Gas prices have gone up higher than electricity and so we’re all much, much more aware of the gas costs when it comes to heating and hot water. We’ve got one electric car and one diesel and I noticed the price of diesel just hit £2 the other day and that’s expensive to fill up a car, so that drives the change to EVs. I think the tariffs that we’re doing are going to work for people who have got EVs to charge them. You’re charging a car at a tenth or a fifth of the cost of filling it up with petrol or diesel if you’ve made that transition to an electric car. That is going to really drive the growth of electric vehicle take-up which means we will be consuming more energy which means we need a grid and renewable generation sources to be able to cope with that. It’s the same with the heat pumps. The government has got the grants out there, whether it’s salary sacrifice on an electric vehicle, and so if you’re a high-rate taxpayer, that’s as much as 40% saving on the lease of an electric vehicle. The heat pump scheme that’s out there is a £5,000 grant towards the cost of your heat pump install. With the research centre that we’ve got in Slough and the training we’re doing with engineers, we’re turning the heat pump industry from a cottage industry of 20-30,000 a year to the government’s target of 600,000 a year by 2028. That scale will bring down the costs. We’re getting the cost down to the £6,500’ish level which, with the £5,000 grant, gets you close to the cost of a gas boiler replacement. If that saves you energy because you’re no longer paying for gas and it’s a generator with that co-efficiency performance factor, I think we’ll see that growth in the heat pumps. I think people are becoming much, much aware that, as the wholesale market shows, there’s a lot of awareness of how energy is being generated, how we’re consuming it and how we’re being more efficient. Both electric vehicles and heat pumps are a really, really good way of being more efficient with energy.
Matt: Sarah, a final word.
Sarah: Yes, in terms of match-fit, I think if we’re looking at this as a Couch to 5k sort of process, we’re off the couch now but we’re quite a long way from the 5k [laughter]. We’re making a start alright and the awareness is growing all the time. There is some training going on and we’re starting to do some serious training for getting heat pumps into homes and I think that’s going to be the biggest single thing that people are going to be seeing as a change over the next decade or so. It’ll be the change in the way we’re heating. From the people point of view, we’re off the couch alright. I think from the system point of view at the other end, that still needs quite a lot of thinking about. Yes, getting the whole system geared up towards electric heating and also towards low-carbon transport and not just thinking, ‘Let’s get everyone into EVs,’ especially if those EVs are heavy EVs, the big ones, but think more about electric bikes, accessible services, good bus services and that sort of thing.
Rebecca: Yeah, absolutely. It’s a brilliant point and I love the Couch to 5k analogy. It reminds me that I probably need to go for a run and get my fitness levels back [laughter], especially if I’m going to be doing a lot more active transport this summer. It’s been a really amazing discussion and I feel like we’ve touched on a whole lot of very interesting concepts. You’ve both, in that closing, opened up an avenue of more discussion that I suspect Matt and I will need to explore in future episodes. Of course, we’d love to have you both back at some point in the future if we can and we can get onto it. Thank you so much. It was a really, really brilliant discussion.
[Music flourish]
I guess all that’s left to say is thank you to everyone that’s been listening. You have been listening to Local Zero with Matt and Becky. Thanks again to our guests for this episode, Sarah Darby and Philip Steele and a reminder, if you haven’t already, please go find and follow us @LocalZeroPod on Twitter to get involved with the discussions going on over there. If, like me, you struggle to constrain your thoughts to a limited number of characters, do email us at LocalZeroPod@gmail.com to share some of those longer thoughts. If you are enjoying Local Zero, which we really hope you are, please, please, please leave us a review. Make it a five-star if you can and that will help us get out there further, climb the charts and really work harder on driving the local energy revolution but for now, until next time, thank you and goodbye.
Matt: Thanks. Bye-bye.
Sarah: Bye.
Phil: Thanks very much. Bye.
[Music flourish]
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