Analysis: The introduction of dynamic electricity tariffs next week will result in lower carbon emissions and lower energy prices for consumers
The impacts of climate change are beginning to be felt in Ireland, driving stronger storms and wetter winters. We need to cut our CO2 emissions fast. Electricity generation accounts for about 22% of our greenhouse gas emissions, yet 11% of wind generation in Ireland is curtailed in favour of polluting fossil fuels, at a cost of €140 million a year to consumers.
From June 1st, all major electricity providers in Ireland are required to offer new dynamic electricity tariffs. These tariffs help increase our use of renewables, by shifting demand to periods of high generation. Flexible tariffs link electricity prices to wholesale prices, providing households with cheap electricity when the wind blows or the sun shines. The result is increased use of renewable electricity, lower CO2 emissions and lower bills.
Green electricity is cheap electricity
So how do these new tariffs change our electricity use and help build a cleaner, greener future for Ireland Electricity prices are generally set by the most expensive supplier to the grid. These are usually natural gas peaker plants designed to fill gaps in supply and peaks in demand. Wind and solar electricity, in contrast, are much cheaper. When wind or solar generation increases, fossil fuel power plants are displaced from the grid, reducing the instantaneous wholesale price of electricity.
We need your consent to load this rte-player contentWe use rte-player to manage extra content that can set cookies on your device and collect data about your activity. Please review their details and accept them to load the content.Manage Preferences
From RTÉ Radio 1's Today With Claire Byrne, how to get the best value electricity tariffs using your smart meter
However, wind and solar are more intermittent. Further, the grid needs a minimum number of heavy 'synchronous' generators, usually fossil fuel powered, to maintain stability. This caps renewable generation in Ireland at 75% of demand. On really windy days with high electricity generation, it's cheap wind and solar that have to be reduced, while expensive gas remains.
What we need are better ways of using this green electricity when it's available. Big battery installations and pumped-hydro systems like Turlough Hill will play a key role in decarbonising our grid. However, they can be expensive to install. We can also export excess energy through interconnectors with the UK and France, relying on imports when domestic supply is low. Again, very important, but at significant cost.
Dynamic tariffs are a simple, cheap solution that works today. Cheaper rates during times of high supply encourage consumers to switch their electricity use. Higher rates during times of low supply discourage heavy electricity use. By matching demand to supply, these tariffs represent a quick win in reducing our reliance on fossil fuels.
We need your consent to load this rte-player contentWe use rte-player to manage extra content that can set cookies on your device and collect data about your activity. Please review their details and accept them to load the content.Manage Preferences
From RTÉ Radio 1's Morning Ireland, Dara Lynott from the Electricity Association of Ireland, on Eurostat's report that Ireland has the highest household electricity prices in the EU
The low-down on dynamic tariffs
Dynamic tariffs provide a variable rate of electricity to consumers, changing every half an hour. The rate is linked to the wholesale price - the amount that the electricity suppliers are paid. Consumers are rewarded for shifting household demand to times when the grid is greener and the cost lower. For example, using appliances such as tumble-dryers, washing machines, dishwashers, charging an electric car, electrical home heating, and, of course, the good old Irish immersion water heater.
The consumer price changes once every half an hour, with the rate published the day before, based on weather forecasts and predicted supply and demand across the grid. The consumer price isn’t quite the wholesale price, while the standing charge remains, as well as a cap on prices. Compared to other such tariffs around the world, we expect the low prices to be not quite as low, but the high prices to be not quite as high.
In general though, more wind equals more electricity supply equals cheaper prices. Now, if you switch to a flexible tariff, those savings are passed directly to you, the consumer. Similar tariffs are gaining traction around the world. 25% of Finns are on one, while the Octopus Agile tariff in the UK has been around for 8 years. In April this year, there were six separate days when prices went negative and consumers were being paid to use electricity.
We need your consent to load this rte-player contentWe use rte-player to manage extra content that can set cookies on your device and collect data about your activity. Please review their details and accept them to load the content.Manage Preferences
From RTÉ Radio 1's News At One, guide for consumers to reduce energy use published
Like night-rate, but better
Think of it as a more dynamic version of night-rate tariffs. These were designed to combat a similar problem with traditional fossil fuels: constant generation but variable demand. We use most of our electricity in the mornings and evenings, with lulls in the afternoon and especially at night. By offering cheaper electricity at night, electricity suppliers moved some demand from peak evening hours to the middle of the night, reducing the use of costly peaker plants.
Renewable energy is one step more complicated. The variable demand remains, but there is also variable supply. A flexible tariff offers cheaper electricity when electricity supply outstrips demand. This might be at night, but it could also be during the day. In the UK negative prices tend to be in the early afternoon, when there is high solar production.
These tariffs are a climate solution where the green transition is as simple as timing your washing machine.
There is no silver bullet to combating climate change, and we need as many potential solutions as quickly as possible. Most people like the idea of being green, but it can be expensive, or require initial upfront costs in exchange for future savings. Electric cars and solar panels both fall in that category.
Dynamic electricity tariffs, by contrast, are a double win, lower carbon emissions and lower cost to consumers. A climate solution that can also save you money where the green transition is as simple as timing your washing machine.
Follow RTÉ Brainstorm on WhatsApp and Instagram for more stories and updates
The views expressed here are those of the author and do not represent or reflect the views of RTÉ
