Let‘s talk tariffs
Comprehending the intricacies of different types of energy tariffs isn’t everyone’s idea of time well spent. However, it can be worth having a top level understanding, especially given the impact of the your choice on both your pocket and the planet.
Variable tariffs – unit cost changes over weeks and months
This is typically the tariff you would be on if you do nothing. The unit prices you’ll pay will change from time to time, mainly driven by the prices in the wholesale electricity market rising and falling, but irrespective of the time of day, the unit cost is the same. Typically your supplier will notify you if they are going to change the prices, usually giving several weeks’ notice. Variable tariffs don’t provide the reassurance of a fixed rate but they also don’t have any associated exit fees.
Fixed tariffs – unit costs locked in for a set period
These tariffs typically offer a fixed unit cost for one or two years. Again, you’ll pay the same unit cost irrespective of the time of day the energy is used. You’ll also pay an exit fee if you want to switch to another deal before the fixed period is up. Fixed tariffs often appeal to those looking for some certainty around their bills for the foreseeable future. However, if the wholesale market price drops your fixed rate might be more expensive than the variable one, and vice versa.
Smart tariffs – unit costs vary during each day
Smart tariffs (AKA Dynamic tariffs or Time of Use tariffs) work differently as you will not only pay a variable unit cost, it will vary up to 48 times each day. There will likely be an upper unit price cap and, in rare circumstances, you can actually be paid for using energy. The energy supplier will release a schedule of these different costs the day before. This creates an opportunity to make savings if you can operate your heat pump at the cheapest times and avoid the most expensive.
Why are Smart tariffs attractive to heat pump users?
Heat pumps work most efficiently when the home is well insulated. The heat pump can pre-heat the home during periods of cheaper electricity and the insulated home acts as a store and retains the warmth, meaning the heat pump can avoid needing to operate during more expensive times. Water can also be heated at the cheapest times and kept hot in the tank, ready for use.
Sounds good but I’m not inclined to spend every evening analysing all the unit costs and setting a new daily heating schedule.
No problem, because Homely and its Smart+ tariff optimisation service will do all that automatically for you. Taking in to account your temperature preferences, It will create tailored schedules to optimise the savings you can make, based on the 30 minute slot prices. Homely also checks the next day’s weather forecasts and factors that in to the plan, as well as learning how long it takes your home to heat up and cool down. Cosiness and savings without compromising on comfort.
How much could I save?
We can’t predict the future so we rely on past performance data when we calculate potential savings. We have run complex simulations based on widely used industry benchmarks and assumptions. Here is what we found:
- Over the 12 month period to June 2021, a typical homeowner on the Octopus Agile smart tariff could have reduced their heating bill by 17.5% by using Homely in Smart+ mode
- Over the 12 month period to June 2021, a typical homeowner on the Octopus Go smart tariff could have reduced their heating bill by 15.5% by using Homely in Smart+ mode
NB – Homely can optimise your savings on the room heating and hot water heating elements of your energy bill. Your total bill will also include other consumption e.g. fridges, televisions etc. This usage has been excluded for the purpose of comparison. Smart+ is Homely’s tariff optimisation service. It is free in the first year and £25 per annum after that.
Can Homely still deliver savings if I do opt for a fixed tariff?
Yes. For some heat pump owners, the comfort and consistency of a fixed tariff is the preferred choice. Homely can still help deliver savings. Whilst it won’t be able to take advantage of pricing highs and lows, it will still factor in local weather forecasts and learning about how the home heats and cools. Homely will then set a daily heating schedule that will ensure your heat pump operates optimally whilst still delivering the comfort and cosiness requested.
Will Homely keep my home warm and cosy?
Of course. Our analysis showed that homeowners using Homely in Smart+ mode would actually put 3.4% more heat into their home. Because Homely is selecting the cheapest times to heat it still delivers the savings. A cosy home, lower heating bills and a reduced carbon footprint. – that’s why Homely is the smart thermostat for heat pumps.