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More households could save on energy bills for lowering peak electricity use this winter

Paloma Kubiak
Written By:
Paloma Kubiak

The National Grid ESO (Electricity System Operator) is looking to ramp up the Demand Flexibility Service this winter which sees energy billpayers rewarded for using less electricity at peak times.

The system operator said it is committed to developing the Demand Flexibility Service (DFS) “even further” this winter and is keen for more households and businesses to take advantage of reducing energy bills as well as their carbon footprint.

A DFS was first proposed last year, enabling households with a smart meter to be paid to reduce electricity use during peak hours. Estimates by the ESO suggested households could save up to £100 by cutting back their appliance use during sessions.

It came after National Grid warned, in the aftermath of the Russian invasion of Ukraine, that in the worst-case scenario, the UK energy supply may suffer blackouts in winter. This was particularly in periods of high demand, such as in the early evenings.

Energy regulator Ofgem approved the scheme in November 2022 and in total, 31 domestic and business suppliers and aggregators participated last winter.

An estimated 1.6 million homes were rewarded for altering their energy use across 22 events, with National Grid ESO confirming this saved 3,300MWh – enough to power nearly 10 million homes.

This winter’s Demand Flexibility Service

The ESO is responsible for balancing national electricity supply and demand, and as part of its Winter Outlook (30 October 2023 to 30 March 2024), it stated that given the continued uncertainty presented by the invasion of Ukraine by Russia, it “cannot completely discount risks of credible events occurring”.

It added: “It is therefore important that the energy industry continues as usual to prepare and plan for a wide range of eventualities.

“The ESO has also therefore announced its intention to reintroduce the innovative Demand Flexibility Service for this winter, to incentivise customers to reduce consumption at periods when margins are tightest.”

It has submitted proposals for this winter’s service to Ofgem and is now awaiting regulatory approval for the service to go ahead.

YourMoney.com understands the ESO is working closely with businesses to support their participation in this year’s service to grow the megawatt output.

It is expected to run 12 incentivised test events that households and businesses can participate in.

Electricity suppliers, aggregators and businesses who directly contract with National Grid ESO will receive a guaranteed acceptance price of £3/kWh for at least six of the test events, subject to registered volumes from January 2024.

This price will be reviewed for the second set of six tests depending on the volume signed up to the service in January.

How does the Demand Flexibility Scheme work?

The Demand Flexibility service was launched last year by the ESO to reduce demand on the UK’s energy network.

It ran events whenever the energy supply was low with households who signed up and who reduced their energy use given a discount on their bills.

You need to have a smart meter to take part, and it was only available if your energy supplier offered a session incentivising you to cut down your electricity use. However, Uswitch launched an app called Utrack allowing customers of any firm take part.

You’ll usually receive notification from your supplier about a session, and while providers were paid £3/kWh, it is up to them how much they want to pass on in savings to participating customers.

The ESO sets a minimum amount of money it requires to be paid. Providers then send in bids based on their own calculations and a price is decided upon.

Last winter, British Gas trialled ‘Peak Save’ where 100,000 customers were invited to take part, while pay-as-you-go provider Utilita offered up to £76 back to billpayers. There were also schemes from Ovo and Octopus, with the latter revealing more than 300,000 signed up to its ‘Savings Sessions’ to earn OctoPoints which were then converted into cash worth up to £100.